Insurance Handbook - Alaska Department of Community and ...

Insurance Topics Updates at www.iii.org/issues_updates
Workers Auto Insurance Compensation
The scope of workers compensation coverage has broadened consider-
ably since its early beginnings. In 1972, states amended their laws to meet
performance standards recommended by the National Commission on State
Workmen’s Compensation Laws. Many states took action not only to expand
benefits but also to make the coverage applicable to classifications of employees
not previously covered.
However, compensation levels are not uniform. In some states benefits are
still inadequate, while in others, they are overly generous. Some states were
slow in adopting the National Commission’s guidelines and have still not
embraced the entire package of 19 recommendations published in 1972. Many
states exempt employers with only a few workers (fewer than five, four or three,
depending on the state) from mandatory coverage laws. A major benefits issue
still to be resolved in some states is the imbalance between levels of compensation
for various degrees of impairment; permanent partial disabilities tend to be
overcompensated and permanent total disability undercompensated.
Some coverage for workers compensation is provided by federal programs.
For example, the Longshoremen’s and Harbor Workers Compensation Act,
passed in 1927 and substantially amended in 1984, provides coverage for certain
maritime employees and the Federal Employees’ Compensation Act protects
workers hired by the U.S. government.
Employers can purchase workers compensation coverage from private insurance
companies or state-run workers agencies, known as state funds. In 14
states, state funds compete with private insurers (competitive funds) and in four
states, the state is the sole provider of workers compensation insurance. State
funds also function as the insurer of last resort for businesses that have difficulty
getting coverage in the open market.
The only state in which workers compensation coverage is truly optional is
Texas, where about one-third of the state’s employers are so-called nonsubscribers.
Those that opt out of the system can be sued by employees for failure to
provide a safe workplace. The nonsubscribers tend to be smaller companies, but
the percentage of larger companies opting out has been growing.
Some businesses finance their own workplace injury benefits through a
system known as self-insurance. Large organizations with many employees can
often estimate the cost of routine types of injuries. Self-insurance, along with
large deductibles, which are in effect self-insurance, now account for more than
one-third of traditional market premium.
About nine out of 10 people in the nation’s workforce are protected by
workers compensation insurance.
74 I.I.I. Insurance Handbook www.iii.org/insurancehandbook