Monopolistic Funds and Their Problems Back In News

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Workers Comp Monopolistic Funds

Why do states create monopolistic funds? As I posted yesterday, there are quite a few state-created Workers Comp funds that are having many troubles.

Vector Graphic of Dollars Icon Monopolistic Funds With Green Background
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The reason for these problems might be the softening of the Workers Comp market. I think there are many problems with state-created funds including:

  1. Poor customer service: If you are backed by the government, why does a fund need to have customer service, as there are no investors to answer to whatsoever?
  2. The state will prop up a failing fund, but a private company will go under.
  3. The funds are usually very large with departments not communicating.
  4. Some funds attract and hire employees that could not make it in the private world. The pay rate is usually lower than the market average, which means the talented claims people or other insurance personnel will leave for more $.
  5. The funds receive favorable loan rates which lowers the motivation to turn a profit to pay back the loans.
  6. The state-backed funds “take on all comers” as they are sometimes the insurer of last resort. This means underwriting expertise will be sacrificed to write risky policies.
  7. Hand Presenting Monopolistic Funds Banking
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    The states do not keep any of the control over the funds once they have been started. I have seen this really harm funds as they have no one to answer for in their practices.

  8. Their rates are usually higher than most carriers, which causes employers to go elsewhere to find Workers Comp coverages.
  9. Internal fraud such as in CA, OH, and others.

There are many more, but I think you may be able to see a trend in these nine. Please note that there are great employees in many of these funds. I am mainly questioning the management of those funds internally and externally by the states.

 

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James Moore

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Mgmt Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications

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