Now More Than Ever: Your Trusted Partner

In October the State Fund Board of Directors named Doug Stewart as Interim President and CEO. Prior to this appointment, Mr. Stewart served as State Fund’s Chief Risk Officer and has played a vital role in the leadership team during a time of significant organizational transformation. He brings more than 35 years of insurance industry experience in the areas of claims, underwriting, marketing, sales, USL&H, and risk management. The Board will be conducting a national search for a permanent President/CEO.

Under Mr. Stewart, State Fund will stay focused on our customer-centric direction and initiatives. We will be delivering more products and services that make it easier for you to do business with us.

Financial Strength and a Steadfast Commitment

State Fund has filed an increase of 5 percent in collectible premium for new and renewal policies effective on or after January 1, 2010. This rate increase is driven by medical inflation in the workers’ compensation system. Since 2005, medical treatment costs have increased at an annual rate of 14 percent.

We understand the strain California businesses are experiencing in this difficult economy. It is important to remember that our premium levels have fallen significantly since 2003, and even after this increase will still be 43 percent below pre-reform levels. We continue to offer Merit Rating, Claims Free Credit, group, and premium discounts. And we are still the one carrier that can meet all the needs of your book of business and provide you with high-caliber safety and claims programs to help you serve your clients.

Now more than ever, you need a trustworthy partner to protect your business, your clients, and their employees. State Fund is financially strong and dedicated to serving employers in all industries across California. Our steadfast commitment guarantees you and your clients a strong and stable workers’ compensation option.

As we move into 2010, we encourage you to look to us as your partner in securing, retaining, and serving your clients. Thank you for your support.

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“Ex” Marks the Spot: What You Need to Know About New Changes to the Experience Modification Formula

Changes are coming to the California Experience Rating Plan and may make a difference in the premium your clients will pay in 2010 and beyond. Insurance Commissioner Steve Poizner recently approved revisions to the formula for calculating experience modifications (ex-mods). As California’s workers’ compensation expert and your business partner, State Fund wants to help you learn more about what to expect and how to inform your clients.

The changes, applicable for ex-mods with rating dates on or after January 1, 2010, will not impact the ratings of all employers in the same way. The degree of change for an individual employer attributable to the revised formula will largely be determined by the number and size of losses and the employer’s payroll. Most employers will experience a change of a few percentage points under the new methodology (see accompanying chart). However, greater changes are possible, with larger employers the least affected.

What Is Changing—and Why

At the request of Commissioner Poizner, the Workers’ Compensation Insurance Rating Bureau (WCIRB) formed a task force to examine the ex-mod formula in 2007. The group set out to enhance the ex-mod’s predictive value and make it easier to understand, so that employers would more strongly perceive their ex-mod rating as an incentive to manage a safe workplace.

For 2010, the methodology used for splitting actual losses into primary and excess components has been changed to the “single split” model used in many other jurisdictions. The first $7,000 of every loss will be considered primary. According to the WCIRB, this change will improve the predictive accuracy of the Experience Rating Plan by approximately 12 percent and is intended to better reflect two statistical tendencies:

• The incidence of claims is more predictive of an employer’s future losses than the actual size of a given claim, which could be driven by factors beyond an employer’s control. In other words, claims frequency matters more than claims severity.
• The loss experience of a large employer tends to be more predictive of future losses than that of a small employer.

Projecting the Impact

The accompanying chart shows the WCIRB’s projection of how the changes will affect employer ex-mods. Each employer’s situation is unique, however, and it is impossible to predict the exact outcome for a client without doing the math. If you have any questions about the Experience Rating Plan and its impact on your clients, please contact your State Fund marketing representative.

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A Target Market: State Fund Subclasses Reduce Your Clients’ Premium

Did you know that State Fund offers subclasses for various industries that can save your clients money? The subclass base rates are at least 15 percent lower than the standard classification base rates. State Fund has created these subclasses in recognition of operations that have demonstrated lower-than-anticipated-risk for their industry’s standard classification. For 2010, we are introducing two new subclasses and emphasizing our subclasses as a target market opportunity for you and your clients.

State Fund’s 15 subclasses are targeted at segments of four industries:

• Farming (mechanized production, plus a new subclass for bush berry crops)
• Auto/truck operations (estimators, including a new subclass for tire dealers)
• Restaurants with higher revenue (new for 2010, the subclass rate is now 20% below the standard classification rate)
• Trucking (local hauling)

Each subclass has specific eligibility requirements. State Fund will endorse both the subclass and the standard classification on qualifying policies. The experience (payroll and claims) that an employer develops in these subclasses is reported to the Workers’ Compensation Insurance Reporting Bureau (WCIRB) under the standard classifications.

If your clients might qualify for the State Fund special subclass rate, or if you have questions regarding their eligibility, please contact your local State Fund underwriting team. The following chart shows the subclasses that are available to you and your clients.

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Reminder: For Fast Results, Use State Fund’s Online Submission

State Fund’s online submission tool makes it fast and easy for you to submit applications for insurance. Since extending this convenience to our broker partners last year, we have significantly streamlined our business submission process. Our online submission product is now compatible with both Applied and AMS systems.

Whenever you need to make a submission, just follow these simple steps:

• Pull up the client in your Applied or AMS system.
• Follow your system’s submission instructions, and select “State Fund” as the carrier.
• Once your management system connects to State Fund Online, your ACORD application information should automatically load into our system.
• Fill in any missing fields and supplemental questions, attach the loss runs, and click “Submit.” That’s it!

Don’t use Applied or AMS? You can log into State Fund Online and select the “Quote” tab to enter the submission directly. Either way, your submission is routed directly to the State Fund underwriter.

With the online submission interface available anytime, State Fund makes it easier—and faster—for you to do business with us. If you have any questions about using online submission in your brokerage, please contact your State Fund marketing representative, or call State Fund Online Support at (866) 721-3498.

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State Fund’s New Ad Campaign

State Fund has introduced an advertising campaign to help raise our visibility and support your efforts to market State Fund to your clients. Our ads carry a common theme reflected in the headline, “We protect the people who make California work,” and highlight State Fund’s dedication to California employers and employees.

The campaign will reach employers, brokers, and associations. Print and online versions of the ads are appearing in insurance publications. Additionally, the ads will run in online editions of Business Week and other business journals as well as in trade association newsletters.

Our ad campaign is further evidence of our ongoing effort to tell the State Fund story to our broker partners and your clients. To borrow a line from the ads, “Together, we’ll help keep California working.”

Safety Products Bring Extra Value to Your Clients

State Fund adds value to your clients’ policies through our safety products and training materials. These informational resources are readily available at no additional charge to help your clients and their employees achieve safer workplaces and reduce on-the-job injuries.

State Fund’s Safety & Health Services Department has a dedicated Safety Products Unit that tailors its expertise to serve employers in various industries and occupations. The unit produces and distributes materials that educate and train workforces, instill a safety culture, and help employers meet their workers’ compensation and legal responsibilities.

Your clients can benefit from the following safety products (most of which are available in English or Spanish):

• Pamphlets focused on educating employees in safe work practices.
• Fast Guides: quick-reference publications on proper safety practices.
• Posters for the workplace.
• Videos and CDs.
• Forms and checklists for documenting safety benchmarks.
• Cards, signs, and stickers to call attention to specific hazards or required practices.

Whether your clients want to add comprehensive material to their loss control program or need help with building a safety foundation, State Fund’s safety products can be a valuable resource. For additional information on setting up your clients with safety products, go to Safety Catalogs or contact your State Fund marketing representative.

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Start Spreading the News: Get Direct Automatic Delivery of Broker Update

Since you are reading Broker Update Online right now, here’s a quick question for you: How did you receive this issue? If a colleague in your brokerage forwarded it to you, we invite you to have Broker Update Online delivered directly to your e-mail inbox next time. That way you won’t have to rely on someone else to route your brokerage’s e-mail copy to you, and you can start using the inside information in Broker Update Online at your earliest possible convenience.

If you are reading this as the primary contact for your brokerage, we’d like to remind you to forward the Broker Update Online notification to other producers in your office. Better yet, you can simplify things by having your producers request their own copy of Broker Update Online directly from State Fund. What’s in it for you? Less e-mail forwarding and more value—the information in Broker Update Online will reach your producers more quickly so they can put it to good use in their job.

Here’s how to request direct automatic delivery of Broker Update Online: Send an e-mail to webmaster@scif.com with contact information (name, e-mail address, and brokerage) for each recipient. We’ll take care of the rest. And don’t worry; we won’t be using this list for anything except sending out Broker Update Online each quarter. As always, we thank you for your interest in Broker Update Online and State Fund.

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