Arizona Privatizing Workers’ Compensation Insurer

The Arizona Legislature has approved a bill to privatize the state workers’ compensation insurer as an Arizona mutual insurance company, beginning Jan. 1, 2013.

The State Compensation Fund (SCF) was created in 1925 by the legislature to provide a ready market of workers’ compensation insurance for state employers at the lowest possible cost. SCF has operated as a nonprofit agency, with income derived from policyholders’ premiums and investments going toward benefits for injured workers, and excess income returned to policyholders in the form of dividends. SCF has been under the supervision of a board of directors who have been appointed by the governor.

As approved, the legislation now makes SCF a mutual insurance corporation, entitled to all of its assets and liabilities, and subject to all of the same laws as any other mutual casualty insurer licensed to write insurance in the state. Starting July 1, 2014, the successor mutual insurance company will not be able to use the terms “state compensation fund” or “SCF” in its name or logo.

“We have been planning for this transition, and we do not expect it will change the day-to-day operations of SCF Arizona,” said Donald A. Smith Jr., president and CEO, on behalf of his organization, noting the privatized company looks forward to serving the workers’ comp market for many years to come.

The legislation is awaiting the governor’s signature.