Workers Compensation Tight Spot – Headed To The Assigned Risk Pool

We often receive calls and emails from employers as they are about to go into their state’s Workers Compensation risk pool or State Fund - sometimes called Assigned Risk. The function of the risk pool/state fund is as an agent of last resort.

The employer will be assigned to a certain carrier. The carrier has to take on a riskier client. The employer has to pay exorbitant fees to have coverage.

There are various reasons why the employer may not have been able to find coverage in the normal insurance marketplace. The usual reasons are:

· Experience Mod Factor is too high – 1.25 or higher

· Carriers are not writing coverage for that type of business – trucking industry in 2002

· Type of business is very high risk – asbestos removal company

There are other reasons. The above are the ones we see most often.

What can an employer do to stop from going into a risk pool? Actually, once the company is headed into the risk pool, there is not much that can be done right away. Changing your safety program is the long term solution if your company’s Experience Mod is high.

They quickest way to avoid Assigned Risk Pool is to look for alternative coverages such as self insurance, captives, or PEO’s . Self insurance and captives take too long to set up and administer if you are within 120 days of being placed into an assigned risk situation.

Your company may find that PEO’s are the quickest and most economical way to avoid the Assigned Risk Pool. We have found PEO’s to be a great alternative, but make sure you know with whom you are dealing with as PEO’s were very not very regulated in the past. Understanding how PEO’s work would be your first step.

I will cover PEO’s in the next article.