Letters to the Editor

Dear Editor,

We are responding to an opinion editorial by Mark Sektnan, Vice President for the Association of California Insurance Companies that ran in Capitol Weekly on June 16 written, in which he suggests State Fund is seeking an unfair competitive advantage by pursuing legislation that would allow us to offer workers’ compensation coverage for California employers who have employees out of state.

Currently, State Fund policyholders who have employees working outside California have to obtain at least a second, separate workers’ compensation insurance policy cover those out-of-state workers. We would like to make it easier for our customers to do business by getting the coverage they need for all of their employees in a one-stop shop that will save them time and money. AB 228 will amend the Insurance Code to allow State Fund to offer coverage in other states for our California-based customers who have employees working outside the state.

State Fund does not plan to seek licensing beyond California. We plan to use a fronting arrangement like the State Funds in Colorado, Kentucky, Texas, Montana and others. The fronting carrier will be a private insurer licensed in all states and subject to the payment of federal income tax on this program.

The truth is State Fund’s tax-exempt status plays no role here.  State Fund is chartered to be the “yes” company – to compete fairly in the market place while providing workers’ compensation insurance to all employers who need it – a tall order.  Our exemption from federal tax helps level the playing field. State Fund does pay real estate and premium tax.      

The proposed legislation is a win for California employers—it will streamline the insurance process for many employers and provide them with more options for their workers’ comp insurance. And coming out of the worst recession in recent memory, we think removing obstacles to business and job growth in California is a good thing.

Tom Rowe,

CEO, State Compensation Insurance Fund