State Fund Dividend Plan to Include Non-Renewing Policies
On November 18th, 2011, State Fund announced plans to disburse $50 million to qualifying policyholders in the form of a premium credit that is based on 2011 estimated annual premiums and will be applied during the 2012 policy year. The credit would be available to 2011 policyholders who:
- Paid their premiums timely and kept their policy in good standing in 2011, and
- Finalize their final audit bill for 2011 within six months of expiration.
Our Board of Directors has amended part of this declaration to eliminate the renewal requirement following discussions with California Department of Insurance (CDI).
“We had very constructive discussions with the Department and agreed to drop the renewal requirement. The dividend declaration is a positive development for California employers and we felt it was best to move forward without distraction and appreciated CDI’s input,” said Larry Mulryan, State Fund’s Board Chair.
Tom Rowe, State Fund’s CEO and President has described the dividend as a down payment on our continued commitment to help California employers manage the cost of their workers’ compensation insurance.
We announced a zero-net increase in our most recent rate filing and increased discounts for qualifying members of our group insurance program with the California Farm Bureau Federation.
State Fund last declared a dividend in 2001, which was more than $92 million.
Since our inception in 1914, State Fund has paid more than $4.9 billion in dividends to policyholders – a record unparalleled among all California workers’ compensation carriers.
We hope this good news is helpful to you and your clients.
Under California law it is unlawful for an insurer to promise the future payment of dividends under an unexpired workers' compensation insurance policy or to misrepresent the conditions for dividend payment. Dividends are payable only pursuant to conditions determined by the Board of Directors or other governing board of the Company following policy expiration. It is a misdemeanor for any insurer or officer or agent thereof, or any insurance broker or solicitor, to promise the payment of future workers' compensation dividends. Past dividend performance is no guarantee of an insurer's future dividend performance.
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January Rate Filings
Good News for your Clients, Better News for your Farm Bureau Members
 State Fund filed a new rating plan with the California Department of Insurance. The plan adopts the Workers’ Compensation Insurance Rating Bureau’s rate relativity adjustments for new and renewed policies effective December 1, 2011, but holds the line on its overall rate level. So this means an overall zero net rate increase. And we have even better news for your agricultural accounts.
We will also increase the group discount for policies insured through the California Farm Bureau Federation, the state’s largest farm organization, from the current level of 6 to 20 percent effective January 1, 2012.
The Farm Bureau discount benefits eligible farmers and ranchers who have successfully maintained a safe work environment.
“This rate filing shows that we are making progress on our efficiency initiatives and have maintained strong underwriting discipline. The Farm Bureau and State Fund have an important partnership and this increased discount reflects their outstanding results over the years,” said Tom Rowe, State Fund President and CEO.
Although manual rates will increase for some classifications, other changes to our rate filing, including the increase in group discount available to qualifying Farm Bureau accounts, will result in an overall decrease in collectible premium of approximately 1 percent.
“We understand that California’s businesses continue to experience difficulties in the economy,” Rowe stated. “State Fund’s role is to help employers manage the cost of their workers’ compensation insurance by offering a stable and fairly priced option for those employers who have many choices and those who have few.”
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State Fund Launches a Blog
State Fund is entering the social media space with a CEO blog. The bi-monthly blog, directed primarily to the broker community, will provide a platform for State Fund thought leadership.
State Fund President and CEO, Tom Rowe, and guest bloggers (State Fund subject matter experts), will share ideas about workers’ compensation insurance in California, State Fund’s role in the marketplace, and key issues facing employers, brokers, and workers. The blog is accessible on our home page and broker page.
Comments are welcome, and Tom hopes to start robust discussions. Look for Tom’s blog at Statefundcablog.com.
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The California Farm Bureau Federation is rolling out an incentive program for producers who place business into the State Fund/Farm Bureau group. The Farm Bureau's Harvest a Vacation Getaway Contest will reward producers who hit the contest's paid premium threshold. Contest winners will win a $1,000 travel voucher towards the vacation destination of their choice.
Want to win?
Simply place $500,000 of new paid premium into any State Fund/Farm Bureau group from January 1, 2012 through December 31, 2012, and win a $1,000 travel voucher. There is no limit to how many times an individual producer can win, so the more business a producer places within the threshold, the more vouchers that producer can win!
For official contest rules, please visit:
http://www.statefundca.com/pdf/2012HarvestAVacation.pdf.
And now eligible accounts can receive a 20 percent discount on their workers’ compensation premium by joining the State Fund/Farm Bureau group.
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 Experience Rating Plan - 2012 Update
2012 will be the third year in the WCIRB’s three-year overhaul of the Experience Rating Plan (ERP). Three changes are effective January 1, 2012 for new and renewal policies with anniversary rating dates of 1/1/2012 and beyond:
- The Experience Rating formula uses separate credibility factors for primary and excess losses rather than one “W” value; use of the “B” value has been eliminated. This is a fine tuning of the ex-mod calculation using the single split for claims introduced in 2010 which significantly changes the calculation formula.
- Section VII, Rule 7, Maximum Experience Modification, is eliminated because it is no longer relevant due to the greater control allowed by the introduction of primary and excess credibilities. Previously ex-mods for the smallest of ratable employers were capped at 150%.
- The ex-mod rate sheet has been redesigned for greater clarity and to provide additional detail.
New features that can aid in underwriting a risk include:
- Data for each policy is shown separately and identified by carrier and coverage dates.
- Payroll and losses developed under each policy are presented side by side, as well as payroll and loss totals for each year and for all three years combined. You no longer have to guess how many small (<$2,001) claims might have occurred each year; that figure is shown too.
- Expected losses and actual losses for each class code are included in the side by side display, making it easy to see if an insured generally has had higher (or lower) than expected losses, or if one year might have been an aberration.
- The formula used to calculate the ex-mod is shown at the bottom of the rate sheet, with the employer’s losses and credibility factors displayed. This makes it easier to explain a spike in an ex-mod to an employer.
To see the complete WCIRB Ex-Mod Rate Sheet with each of its components explained, please click on: https://wcirbonline.org/wcirb/Employer_Guide/experience_rating_wksheet.html
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Timely and Accurate Premium Payments
 Don’t underestimate the value of making timely and accurate premium payments.
Late payments, collection efforts, and unpaid premiums have an adverse effect on the price all employers pay for their workers’ compensation insurance.
State Fund exists to provide fair pricing for the workers’ compensation needs of California employers. To support our mission, we will implement new procedures to improve the timeliness and accuracy of payments and premium deposits. These changes will help ensure that all policyholders are treated fairly and will help manage the overall cost of workers’ compensation insurance for employers.
Currently, we collect a premium deposit to establish coverage and then bill for premium throughout the policy year at regular intervals. Our payroll/billing procedures collect premium in arrears—after the coverage has been extended.
Going forward, State Fund will move to a multiple-payment stipulated billing cycle, which will require the first payment at policy renewal and a deposit. This deposit will roll over to the next policy term, providing continuous coverage.
Policyholders will also be required to complete two payroll reports: an interim payroll report six months into the policy period and a final payroll report due at the end of the policy term. Following the interim payroll report, the remaining premium billing statements may be adjusted to reflect current payroll information.
These new procedures will be applied to all new and renewal policies incepting on or after January 1, 2012.
Below is a table providing an overview of the changes to deposit premium and billing that will be effective for all accounts by premium threshold.
Changes to deposit premium and billing.
State Fund has enhanced our online service tool, State Fund Online, to make it
easier for your clients to make their workers’ compensation premium payments online and to pay by credit card. You and your clients can register for State Fund Online today.
These new payment procedures bring State Fund into alignment with standard business practice and more importantly, they will enable State Fund to continue to protect California employers.
Note: Minimum premium policies will continue with premium deposits of no less than 100 percent of minimum premium. Estimated Annual Premium (EAP) will determine annual, semi-annual, or quarterly payroll reporting.
Professional Employer Organizations (PEOs), farm labor contractors, and temporary help agencies will continue to use payroll reporting to make payments, but deposit requirements will increase to 25 percent.
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Key State Fund Bill Among Approved Workers' Comp Legislation
 A State Fund bill and another legislation aimed to curb abuses in the prescription of compound drugs were among a slew of workers’ comp related bills recently approved by Governor Jerry Brown. They are Assembly Bill’s 228 and AB 378.
AB 228 (Fuentes) gives State Fund the authority to provide coverage for California employers who have out-of-state employees, while AB 378 (Solorio) places new restrictions on pharmacy reimbursement with a focus on compound drugs, co-packs and medical.
With the approval of AB 228, employers and brokers interested in getting a quote to cover employees outside of California, can now go through a more straightforward and cost-effective process.
Another significant workers’ comp bill approved by the governor is AB 1168 (Pan), which requires the DWC to impose a fee schedule on vocational experts.
The California Workers’ Compensation Institute provides a comprehensive list of enacted workers’ comp legislation.
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 Farm Bureau Group Program
What is the Farm Bureau? The California Farm Bureau Federation is a non-governmental, non-profit, voluntary membership organization that works to protect and promote agricultural interests and solve farm and rural problems throughout the state. Comprised of 53 county Farm Bureaus representing a membership in the tens of thousands, it is California's largest agriculture-related organization.
Why should my client join the Farm Bureau? Membership gives your clients a voice – an outlet for feedback, representation of their interests in the legislative process, and a valuable network of contacts and resources. The Farm Bureau also offers many membership services, including various discounts on supplies, vehicles, travel, and insurance. Visit the California Farm Bureau website for more benefit information.
Why State Fund and the Farm Bureau Group Program? Since 1943, State Fund and the Farm Bureau have collaborated to offer group workers’ compensation insurance to qualifying California growers and ranchers. We offer a competitive commission structure to our brokers, and qualifying growers will find the group program consistently offers the best value. State Fund’s Farm Bureau Group Program promotes and rewards safe and healthy work practices. Together we can help assure that California agriculture can continue to grow and prosper.
What are the Farm Bureau Group Program policyholder benefits?
- A 20% discount on their State Fund policy
- Lowest minimum premiums in the industry
- Agriculture-specific safety training and consultation
- Seminars on farm machinery safety, heat stress, and material handling
- DVDs on safety including orchard, tractor, dairy, ATV, and vineyard safety
- Tailgate training
- Injury Illness and Prevention Plans
To find out more, visit our Group Insurance page.
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