Alabama Worker's Compensation Alternative

In Alabama, companies have an attractive alternative to high worker's compensation premiums. The Alabama Self Insured Worker's Compensation Fund is a not for profit, member owned, A.M. Best rated provider of worker's compensation coverage for participating members. Providing rates that are typically 25 percent to 50 percent less than state rates, the Fund operates "at cost."

In 1978, a group of Alabama businesses joined together to solve the problem of escalating costs associated with worker's compensation insurance. Businesses were tired of paying high premiums because even if they did a good job controlling their claim costs, they had no opportunity to get any of their money back.

Sponsored by the Business Council of Alabama, the Alabama Self Insured Worker's Compensation Fund is today one of the largest writers of worker's compensation coverage in Alabama with more than 2,000 members and over $2 billion in payrolls. In 2001, participating eligible members of the Fund will receive over $12 million in refund credits and over $20 million in discounts on their coverage.

Operating as a heterogeneous, group, self insured fund, worker's compensation insurance coverage is offered to eligible members of its sponsoring association, the Business Council of Alabama (BCA). Membership is open to any member of the BCA who meets pre determined minimum premium and underwriting requirements. The primary target market consists of construction, manufacturing, service, retail and wholesale businesses that have been in operation for three years. By an arrangement with its reinsurer carrier, General Re, employers' liability coverage is also provided to customers. In addition, coverage for approved operations of member companies located outside of Alabama is provided through Sentry Insurance. Over 300 independent agents are the Fund's source of business. Additional marketing personnel have been added to the Fund's staff and increased attention focuses on cultivating favorable agency relations. This focused attention on marketing efforts through the independent agency system helped business increase dramatically in the early 1990s.

"We specialize in just one thing worker's compensation," says the Fund's Administrator, Freda Bacon. "We work with businesses of all sorts, from machine shops to automobile assembly plants; from nursing homes to law firms; from retailers and restaurants to manufacturers."

"Many people will tell you that there is some risk involved in being in a self insured fund. They are right, but as in business, risk can also bring reward," says Bacon. "The important thing is to manage risk."

The Alabama Fund looks for businesses that are serious about loss control. This helps keep claim costs down. Second, the Fund collects enough in member contributions to cover operating costs and maintain a strong financial base. The 1999 audited financial statement shows over $134 million in assets.

Third, insurance is purchased through one of the world's largest reinsurance carriers to cover large claims and catastrophic losses. Finally, some of the best people in Alabama handle claims. Over 1,800 hours per week are put in to make sure members receive the best service possible.

"We are doing an extraordinary job in managing our worker's compensation risk and are proud to have served the Alabama business community for over 20 years," says Bacon. While many national insurance carriers have loss ratios exceeding 100 percent, the Fund has consistently held its overall loss ratio below 60 percent for the last six years.