Document pmBeLBEvwboQGrM8LvXmGNp6E

WORKMEN'S COMPENSATION AND INSURANCE sureds Theoretically, every policyholder is a part owner of the company and, much like the stockholder of an ordinary corpora tion, is entitled to vote at regular and spe cial meetings of the company and to share in profits earned by the company Excess earnings, if any, are returned to the mem ber insureds in the form of premium re funds, commonly called "dividends" If the premiums collected do not meet the losses and expenses incurred, each in sured may be required to contribute toward the company's loss for the period How ever, a mutual company may agree by con tract with its policyholders to limit their contingent liability to a specified sum, and, m most states, a mutual company may also write completely nonassessable policies A reciprocal exchange is an association of insureds or subscribers who authorize an attomey-m-fact to exchange insurance for them A percentage of the premium paid by each subscriber is deducted by the attomey-m-fact, who agrees to meet all ex penses of management except claim ex penses Losses and claim expenses are paid out of the remainder of the premiums, with dividends or assessments declared depend ing upon the losses State insurance funds In some states, funds have been set up by the state to provide insurance The state acts as an insurer, collecting premiums and offering protection against specified haz ards Usually, the state fund is empowered to wnte only workmen's compensation in surance, or workmen's compensation and employer's liability insurance. When the law provides that a given form of insurance must be procured only through the state fund, the fund is spoken of as monopolistic. When the fund operates alongside private earners, its operations are described as competitive The U S Department of Labor* reports that seven states and a commonwealth have monopolistic state funds Nevada, North Dakota, Ohio, Oregon, Washington, West Virginia, Wyoming, and Puerto Rico. The others are competitive or have no state fund mitted in most of the states for employers able to meet specified requirements How ever, generally only companies with large staffs, legal, safety and medical departments, and competent investigators can self-insure. The compensation costs the company must be prepared to cover include benefits paid to the injured worker, benefits paid to his dependents, medical bills, administra tion costs, cost of reinsurance, legal ad vice, lawsuits, and claims investigations, reserves, and costs of safety service to con trol compensation accidents and medical expenses Considerable self-insurance for work men's compensation is in effect Usually, a self-insured company also purchases insur ance from an insurance earner to cover losses that exceed a stated maximum, and bears only those losses that fall below this It is important to differentiate between self-insunng and not carrying insurance Self-insunng is a positive action m which reserves are set aside to meet anticipated losses For self-insurance to be sound, a fairly accurate estimate must be made of the frequency and the seventy of the losses that may be expected Usually, the state agency administenng the coverage requires proof of financial re sponsibility from the nsk and other guar antees m the form of a bond or security if a company expects to self-insure Administration States vary widely on methods of admin istration, but workmen's compensation com missions or boards and the courts are com monly used Administration by special commissions or boards may be more effi cient than administration by the courts, pri marily because the handling of compensa tion claims involves highly specialized procedures and needs the attention of spe cialists Courts often are not able to spend the time necessary to handle the multitude of compensation cases which anse In the handling of compensation claims, there are four methods m general use Self-Insurance A self-insured employer assumes his own risk by creating his own reserves and pay ing his own losses Self-insurance is per State Workmen's Compensation Laws, Bulletin 161, U S Department of Labor, re vised 1964 11-12