Workers’ Compensation, Competitive State Funds

Each state has their own method for how they go about setting up a provider of last resort for workers’ compensation insurance coverage. This provider of last resort is also referred to as the assigned risk provider, the state fund or sometimes as the pool. This provider is designated as the provider of last resort for businesses who cannot find coverage through the open market. It is typically more expensive from this provider for a number of reasons.

Although, I have recently found there are a few state funds that are very competitive.  Some are so competitive my select carriers cannot compete with the rates being offered. I have a hand full of accounts that in the last few months I have tried to move out of the various state funds, but cannot find competitive rates.

Two of the states that I have had a hard time competing in are Texas and Kentucky. Both of these “competitive state funds” are really good at what they do. Offering Workers Compensation with both great rates and great safety resources for their insured’s. The clients I have tried to move out of these state funds are companies that do not fit in the underwriting box of our main street carriers. They still have opportunity to get coverage from a carrier that will offer pay as you go work comp and get out of the state fund. However the day has come when my current clients have said I am perfectly fine staying with the state fund. These carriers are offering dividends in some situations and are also offering an in network option. The in network option offers a network of Doctors that work with the carrier and streamline the process for workers’ compensation claims. This saves money for the employers and lowers the total pay out for a claim.

The state of Colorado also offers a “competitive state fund”. Three years ago I would have said my markets could still compete with these states in the voluntary market. Today I am not so sure. Don’t get me wrong it is still worth going through the process of getting quotes from all options. Depending on what classes of business the funds are doing really well in, you may be able to find better rates in the state fund. Much like the select carriers that are out there, the state fund will write most classes of business, but that does not mean they are going to offer their best pricing. For instance, take a Class Code 9014. This is for a commercial/industrial janitorial business in the state of Texas and this business has a substantial amount of payroll. The industrial cleaning portion of this company is going to kick them out of most of my select carrier underwriting guidelines. That leaves me with my high-risk carriers and my state fund (Texas Mutual). The high-risk carriers are usually going to have higher rates because they are offering to cover a business that not many carriers are willing to take the chance on. The high-risk carriers can only offer a 25% max credit. If the rates are not low enough to begin with we still are not going to be able to save the client money. On top of that we have the in network option and the dividend program. Many customers are benefiting by staying with the state fund of their home state.

The flip side to this is if we take the same Texas Janitorial Company and they decide to expand their operations outside the state of Texas. This would create a completely different scenario. State funds do have the ability to offer “other states” coverage’s on a separate writing paper or policy, but that is usually very limited to states and how much payroll will be allowed. In this case a high-risk carrier would be beneficial. The high-risk carrier will often times have the ability to add additional states to the policy as the company grows. They may also be able to offer better rates than the alternative, which would be having a policy with a handful of separate state fund policies.

Whether I am trying to move an existing client to a more competitive carrier or I have the opportunity to help a client that has come to me in need of a new policy. I have the tools and the ability to take care of the companies insurance needs. That can be through the state fund or through one of our many carriers.