Introduction to California State Fund

Unless you've started a business in California, you probably haven't heard of California State Fund.  It's one of those agencies that the general public doesn't come across but ask any business owner in the State with employees and they know right away.  California State Fund is an interesting hybrid department that straddles both the public and private in our State and after a longer and sometimes painful birth, it's settled into  an important role in the California's Workers Comp market.  Let's take a quick look at how it works and most importantly, what it does for start ups and business with more risky types of business that generally would not find Workers Comp coverage on the private market or would pay an exceedingly high cost to do so.  Let's jump in to the world of State Fund.

The origins of State Fund actually go quite a ways back to 1913 and the Boykin's Act which established the workers compensation insurance carrier.  The original set-up was a public funded entity separate from the State government which clearly was ahead of it's time considering our current world of Freddie Macs and the like.  The California State Fund has insured about one quarter of the market since it's inception.  In the mid 2000's there was a large expansion of its market share to about half of the market when man private carriers left the market due to an explosion in claims experience and pricing pressures.  The marketplace has normalized since then with some legislative efforts in Sacramento with State Fund now insuring about 20% of the market.  Let's look at this 20% and determine why and when California State Fund makes the most sense for your company.

In general, California State Fund is unique on the Workers Comp market because it will insure any business (that meet general requirements of course).  Private carriers will preclude certain types of businesses based on risk, workers comp claims experience, or how new they are (essentially a lack of claims experience).  The trade off to this underwriting process is that the private carriers on average are much better priced than State Fund which is to be expected.  So how do we navigate this two-tiered marketplace?  First, complete the California State Fund Quote request.  This standardized form will quickly show whether private coverage could be an option for your company.  On the form, there are questions about how long the company has been established (start-up), type of business (risk), and claims experience (claims risk).  With these addressed, we can determine if private Worker's Comp coverage is option or if we'll have to go with State Fund.  The coverages are standardized so it's really a question of pricing and eligibility. Granted, there is some gray area but we'll be able to determine if it's an option. 

Keep in mind that there's no real downside to quoting and even applying (virtually the same form and process of Workers Comp Acord form 130) for a given carrier's Worker's Comp plan.  There is no application fee or fee for our service and ultimately, the goal is to get the best rate for a fairly standardized liability policy.  Worker's Comp coverage is generally offered in 12 month contracts so the time to investigate the available options is prior to renewal...ideally 30-60 days prior. 

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