Voluntary Market Very Critical To Workers Compensation
A voluntary market compares to free market version of workers compensation insurance. Most states set the Advisory Loss Costs. Carriers deviate from the Loss Cost rates by filing loss cost multipliers (LCM)
A group of insurers in a competitive environment who underwrite coverage to insureds based on risk or market dynamics. Usually, employers with low risk (E-Mod) will be placed in the voluntary market. Employers that are more risky may still be placed in this type of market, but it may be very expensive coverage.
The Workers Compensation market itself may dictate whether a voluntary market for a certain business segment exists or not. Having a low E-Mod is not guarantee that an employer will be placed into the market.
If an employer cannot be placed in the voluntary market, they will have to turn to the assigned risk markets for coverage or to some type of alternative insurance plan such as a Captive.
States with assigned risk pools provide a much more expensive coverage if the insureds cannot find coverage elsewhere. The drawback consists of up to a 400% increase over market rates.
The reason for the massive increase in rates is the assigned risk pool is the “last change saloon” for employers that cannot find coverage in the voluntary marketplace.
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