Efforts by the State Compensation Insurance Fund to discourage new business are causing it to undercut its traditional role as insurer of last resort, insurance brokers say -- raising the possibility that some Bay Area businesses will have to close because they can't get workers' comp insurance.
At best, some local insurance brokers say, the financially recuperating State Fund is aggressively turning away some new business as it attempts to boost its surplus. That includes sending potential clients back to their existing insurers if the insurer hasn't refused to renew a policy.
At worst, rankled brokers contend, the word some clients are getting from the San Francisco-based State Fund is brusque: We won't take your business.
State Fund, through a spokesman, denied it is abandoning its duty to act as a safety net provider for the comp market, but said it has a dual obligation to maintain "a fairly competitive" role in that marketplace.
"We're sort of in a Catch-22. Because of unprecedented premium growth (in recent years) we're told we must boost our surplus," said Jim Zelinsky, a State Fund spokesman, responding to the broker complaints. To do so, he argued, the fund must sometimes operate "as a private carrier" would.
For example, Zelinsky said, the State Fund now forces staffing companies to have each of their "bundled" enterprises submit separate applications. "It's a little more arduous," he admitted, "but it's designed to protect us."
Similarly, he said, if a policyholder doesn't pay its premium or a former policyholder doesn't pay its debts, the fund won't renew its coverage or provide new coverage.
Still, overall the fund continues to provide coverage to companies that have been turned down by private carriers and have nowhere else to go, he said. However, Zelinsky added, "if there are other markets, via other companies, we would not write the business."
Only a small percentage of companies "can't get into the State Fund (eventually) but they make it very difficult," said Charlie Weeks, a senior vice president of risk management at Redwood City-based ABD Insurance and Financial Services, the region's second-largest insurance brokerage.
Other brokers agree with Weeks that the State Fund, which has a 60 percent share of the workers' compensation market, is getting much tougher on potential customers. And in some cases, they're not shy about expressing their gripes.
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