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When Workers Comp Carriers Go Bad ? There’s Fund For That

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Workers Comp Carriers

Does the Workers Comp carriers go bad? Bankrupt companies and insolvent insurance carriers are part of doing business nowadays in the world of property/casualty insurance.  There are many reasons for this even though the “economy” is often blamed for every downturn. 

 

Picture Of Insurance Workers Comp Carriers Sign
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Insolvent insurance carriers are usually discovered and monitored long before they shut down.  Many state insurance departments will put an insurance carrier into some type of receivership and then monitor the carrier to see if they can pull the company up by the bootstraps out of receivership.  

Many times, though, the insurance carrier cannot keep enough in reserves to pay claims.  One of the bellwether figures of bad tidings is any insurance company that is operating at 15%  or less in reserved funds to pay claims.  This is especially true in Workers Compensation. 

If the state Insurance Commissioner decides the carrier can no longer keep its head above water the carrier will be unceremoniously shut down.  What happens to all of the pending claims the carrier was handling?   In almost all cases, there is a fund for that situation.   

Couple Smiling Workers Comp Carriers Holding Credit Card
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Carriers and most of the insureds indirectly have paid into some type of guaranty fund.  The fund’s purpose it to pay another carrier/Third Party Administrator (TPA) to handle the files or to take them in-house and have them handled by a guaranty funds claims staff.  

One of the assumed complications is the injured employees, medical providers, and any type of service provider receiving timely payments.  There is a minor to major (up to six months) delay in providing the benefits.  

A guaranty fund is at least in existence to adjust the files properly.  An example of a guaranty fund is the North Carolina Insurance Guaranty Association (NCIGA).   If you follow the link, and then check on insolvencies, there is a listing of insurance carriers that went under  in 2008.  

The surprising revelation is that most of insurance carriers on the list were predominantly WC insurance carriers.  

Each state has some type of insurance company backup such as NCIGA.  In 2011, state guaranty funds assessed insurers $289.4 million to pay for insolvencies.   That number covers all insurance carriers and not just WC carriers. 

Next up – What happens when self insurers go under?  

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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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