New York Agents Seek to Curb State-backed Workers’ Comp Insurer

A trade group for New York insurance agents wants to rewrite the laws governing the New York State Insurance Fund — a nonprofit state agency that is the state’s largest workers’ compensation insurer — to put it on a level playing field with private insurers.

Under a proposal put together by the Independent Insurance Agents and Brokers of New York, oversight of the State Insurance Fund (NYSIF) would be moved to the New York Insurance Department, which would be required to review the fund for solvency and monitor its market practices. It would also rescind a state law that requires policyholders to give the fund 30 days’ notice when they cancel their policies.

NYSIF is a self-supporting, self-run nonprofit state agency which was originally set up to act as a market of last resort to provide workers compensation coverage for high risk businesses. It oversees both the Workers’ Compensation Fund and the Disability Benefits Fund, which pay benefits to injured and disabled workers in the state.

Over the years, however, the fund has evolved to compete directly with private carriers and now writes an estimated 40 percent of policies in New York. Private carriers, meanwhile, have long-complained about the fund’s market practices, claiming it enjoys a number of advantages they do not.

Insurers have several gripes with the fund, said Ellen Melchionni, president of the New York Insurance Association, representing insurers. One is that it does not make payments to the Aggregate Trust Fund, a pool of money designed to cover adjudicated permanent disability cases. Another gripe is that the fund is not subject to the same reserving requirements as private carriers.

The 30-day rule is another problem, Melchionni said. It gives the NYSIF time to try to retain the business of its policyholders when they try to switch to a private carrier.

“Companies have challenges with competing against the fund because it’s not a level playing field,” she said. Her group supports the bill, “at least conceptually,” she said.

Michael V. Barrett, lobbyist for the IIABNY, said agents in the state “are very concerned with the activities of the [NYSIF] in a number of areas, particularly how there is no oversight.

“As far as agents go, some work with the State Insurance Fund and some compete against it,” Barrett said. “They see how the fund works every day and there is a lot of concern about how the fund handles itself in the marketplace.”

Although New York’s legislative session is scheduled to end June 23, Barrett said the fact six lawmakers agreed to sponsor the legislation bodes well for the changes. The bill numbers are S.7673 and A.10844.