The New York State Insurance Fund is a quasi-government organization that was formed in 1914 to act as the “market of last resort” for worker’s compensation in New York.
Market of last resort means that if your business couldn’t find an insurance company that would sell you workers comp coverage, you would go to the NY State Insurance Fund as they are known, and they would have to provide you a policy. Now, if you can’t find insurance elsewhere that means your claims experience is unusually high, or your company is in a high hazard classification such as contracting, or it’s in contracting in NYC. Many of these types of factors will drive some firms into the SIF.
And because the State Fund MUST accept all firms regardless of their underwriting profile, they have some pricing flexibility to surcharge some customers that most insurers do not. They also have some pricing tools for discounts that most insurers do not have, and we’ll discuss that in a moment.
The bottom line is that the State Fund is a big player for workers comp insurance in New York (they write about half of all the premiums for comp. in NY) and they are a very competitive choice for some industry classifications such as restaurants where they have a long-standing discount and dividend plan at play.
But I will say that the New York State Insurance Fund is often a very hated insurer.
Why?
The answer is multi-fold, but much of it originates from the fact that they are a quasi-government organization so there’s a lot of red tape, a lot of stringent rules, and the typical bureaucracy sort of nonsense that can make many insureds crazy. So crazy in fact that some will pay more to just not be insured with SIF.
With most insurers, there’s some level of flexibility when it comes to managing policy options, but in the State Fund’s world, there is only black and white, and no grey. What they say is what goes. This applies to billings, audits and how you can cancel a policy. At least this is my experience and opinion.
Audits with the State Fund are probably the biggest difficulty I’ve seen experienced in over 35 years of business. SIF auditors will take a hard-nosed approach to rules and guidelines. As an example, if a clerical office worker in a body shop needs to occasionally walk into the body shop to talk to his or her boss, the auditor will often reclassify this worker as a body shop employee.
Fair?
I don’t think so. It’s not like the office worker is picking up a tool or spray gun, but the rules do permit this sort of reassignment, so SIF will take advantage in this circumstance and now the premium jumps up $4,000 or more.
Most other insurers will not make this sort of judgment and keep the clerical worker in the clerical class code.
The other very odd thing about the State Fund is cancellations. If you’re out in the marketplace obtaining alternate renewal quotes from other insurers, you must give the New York State Fund a 30 notice of your intent to cancel. They will then send a rescindable non-renewal notice to you and your certificate holds.
What a mess!
And, it’s really not necessary, it’s just the hardball tactics SIF will play with insureds which drive me nuts.
The bottom line is that for some New York insureds, the State Fund is their only option, so you’ve got to understand their rules and play by them. If you’re a contractor, be especially prepared for audits and have all certificates from your subs ready. If you don’t have certs from all subs you’ve paid during the policy term, you’ll be paying workers comp rates on them too!
Now, if you’re forced into the New York State Insurance Fund because of poor claims history, the best advice I can give you is that you need to change that moving forward.
How?
It may not be easy, but we have worked with dozens of clients who had terrible claims history and were stuck in the SIF with high mods, and VERY high premiums. Through a combination of risk control strategies, training, cultural improvements, and better claims management process we’ve been able to change the trajectory for a client’s claims performance and get them into a standard insurer with lower rates and no surcharges.
It takes a good amount of effort, but the cost of poor claims goes well beyond just premiums. There’s a TON of indirect costs associated with every claim which we’d be happy to discuss with you, but the point is that if company management wants to change and improve where they are when it comes to worker’s compensation, we’re the right people to be speaking to.
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