Private insurers in the workers’ compensation market are casting a worried glance over their shoulders at state state-run workers’ comp funds, and deservedly so.
According to a new study by Conning Research and Consulting, workers' comp state funds have achieved a significant share of the overall insured workers' comp market, with market share increasing in many of the states in which they write.
The Conning study, "Workers' Compensation State Funds: Evolution of a Competitive Force," analyzes the role of state funds and their competitive positioning versus the traditional workers' compensation marketplace, and alternative forms of workers' compensation risk financing. The study reviews state funds' financial and market share results, their effect on the overall market, and the prospects for future growth.
Workers comp state funds now control a quarter of the insured workers comp market despite the fact that they only write in 25 states, according to the study.
"In comparison to the industry as a whole, state funds' loss ratios are higher, but they compensate with lower expenses and increased investment income,” says Mark Jablonowski, analyst at Conning Research & Consulting.
He adds that operating results are on par with the rest of the workers' compensation industry.
As for the reasons for why state funds have shown such strong financial results and grown so rapidly, Conning points to their dedication to loss prevention and control.
“Our research indicates that a key to the state fund success may well be their dedicated approach to loss prevention and control," said Stephan Christiansen, director of research at Conning. "Their mission often includes shared responsibility for health and safety with other state agencies, and so they often incorporate state-of-the-art loss prevention initiatives with financial rewards tied to the insured's loss performance."
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