13 July 2003
Insuring against insurers
It's called the Oklahoma Property and Casualty Insurance Guaranty Association, it's financed by an assessment on insurance companies doing business in the state, and one of its functions is to pay claims by injured workers when the firm who wrote their worker's-comp insurance fails.
What if the Association fails? And it could happen; general manager Howard Howell has reported that the Association's worker's-comp fund will run out of money some time next year, the result of more than a dozen insurance-company insolvencies since 2000 and still more on the way.
The assessment is limited to 2 percent of net premiums; rather than seek a bailout from the state's General Fund, which doesn't have a whole lot of money either, Howell is looking for an increase in the assessment, though this might make marginal insurers more so.
Part of the problem is that companies wanting a piece of Oklahoma business have a tendency to lowball introductory rates as an incentive, and then when they start losing money at those rates, they immediately jack them up, which usually encourages the policyholder to look elsewhere. This is the main reason we have had four health-insurance carriers at 42nd and Treadmill in six years. And it's not a phenomenon peculiar to Oklahoma, either; Howell says that ten, maybe twelve states, are in similarly dire straits.