What does the term "residual market" refer to in auto insurance?

The term "residual market" in auto insurance specifically refers to a segment that provides coverage to high-risk drivers who may not be able to obtain insurance through the standard market due to various factors, such as poor driving records, previous accidents, or other risk-related characteristics.

Residual markets are designed to ensure that all drivers have access to necessary insurance coverage, protecting them and others on the road by preventing uninsurable drivers from operating vehicles without insurance. In many states, this is facilitated through programs known as assigned risk plans, where insurance companies are required to accept a certain number of high-risk drivers within their pool of insured clients, thereby spreading the risk among multiple insurers.

The remaining options do not accurately describe the concept of the residual market. For instance, a market for low-risk drivers would relate to standard insurance markets, while a marketplace for classic cars pertains to a niche market that is distinct from high-risk coverage. A market that doesn’t require any underwriting is not accurately reflective of the residual market's purpose, as the underwriting process plays a crucial role in assessing risk, even among high-risk drivers.