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State Funds – Are They Really Worth It As Insurers Of Last Resort?


State Funds – Are They Losing Viability?

The State Funds that cover just their headquarters state have begun to look elsewhere.  I read today that SCIF (State of California Insurance Fund) has requested legislation where they can expand their coverage into non-California states for their insureds. I was wondering if this would be the first step into privatization and expanding into other states to write coverage there as Brickstreet had done in West Virginia. That would be covered best in another post.

Picture of Plant in Jar with Coins State Funds California

I thought it would be better to look at the forest and not the trees in this situation. Are State Funds – be they monopolistic or as insurers of last resort – worth having in place for Workers Compensation insurance?

State funds such as SCIF (CA) and BWC (OH) have come under heavy scrutiny for various legal problems such as investments and vendors. If one looks at what the state funds charge or deviate from the advisory loss costs, it can be a shocker.

In our premium reviews for employers, we have seen state funds file for up to a 211% increase over the advisory loss costs where the next highest carrier was 147%. I will not name the state as I have been threatened with enough lawsuits due to this blog.

Hands putting coin State Funds on piggy bank with dollars
Wikimedia Commons – 401(K) 2012

Some of our clients have expressed frustration over the service level they receive from state funds. The deficient level of service has often resulted in companies contacting us about our services. I wanted to add that the level of service has improved from comments we have received lately about state funds.

One of the concerns that we have during premium and reserve reviews is finding out the proper person to talk to about an issue. We have often discovered the person handling, for example, audit disputes for a certain region has been moved to another region, been promoted, or left for another company. This means the client employer has to start from square one again.

One thing that makes me have an assurance that state funds are necessary is when the fund operates as an insurer of last resort. The aforementioned 211% factors in the “we do not turn away any company” legislative requirement of most state funds. When a carrier decides to write very risky or high E-Mod/X-Mod/Ex-Mod companies, it has to make up for the deficit somehow.

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One Response

  1. seems like you could draw a useful distinction between monopolistic state funds (like OH or ND) and competitive state funds (like CA or ID). The employer at least has a private alternative in the case of states with competitive funds.


James J Moore - Workers Comp Expert

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Management 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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