The Workers Compensation Rating Bureau of Indiana ("ICRB") is a statutorily created independent rating bureau. Ind. Code §27-7-2-5. The ICRB is comprised of all insurance companies which hold a certificate to make workers compensation insurance in the State of Indiana. Id. The ICRB is organized as an unincorporated association. The ICRB is operated by a Governing Board comprised of twelve members elected biannually at the ICRB's annual meeting. The Governing Board elects a Chairperson and Vice Chairperson. The ICRB employs ten (11) persons. The manager of the ICRB is responsible for day-to-day operations. The ICRB is funded with purely private dollars supplied by its members. Ind. Code §27-7-2-9.
The ICRB performs numerous services many of which are required by statute. Ind. Code §27-7-2-5. The ICRB works closely with the Indiana Department of Insurance ("IDOI"), and in many cases the ICRB's activities are closely monitored and approved by IDOI.*
One of the ICRB's important functions is to serve as the Plan Administrator of Indiana's Assigned Risk Plan (the "Plan"). The Plan is a statutorily created reinsurance mechanism whereby employers who are unable to self-insure or procure insurance in the voluntary market, may apply to the ICRB for the mandatory workers compensation insurance
* The ICRB is licensed by IDOI. Ind. Code §27-7-2-25. The ICRB's rules and regulations must be approved by IDOI. Ind. Code §27-7-2-30. The ICRB's By-Laws must be filed and approved by IDOI. Ind. Code §27-7-2-6. The ICRB's advisory rates must be filed with and approved by IDOI. IDOI has the right to investigate and examine the operations of the ICRB. Ind. Code §27-7-2-12. The ICRB has numerous reporting obligations to IDOI. Ind. Code §27-7-2-20.
PARTICIPATION IN THE PLAN
An employer who seeks to participate in the Plan must first apply for workers compensation insurance in the voluntary market with three (3) members of the ICRB and be rejected by the three (3) members. The employer then applies to the ICRB. Assuming the employer meets all other qualifications, the ICRB binds insurance for the employer. The employer is then assigned to a Servicing Carrier. A Servicing Carrier is a member of the ICRB who has agreed to act as the insurance provider for employers participating in the Plan. The decision of an employer to participate in the Plan is completely voluntary. Likewise, an employer may leave the Plan and procure voluntary market insurance at any time.
OPERATION OF THE PLAN
The ICRB as Plan Administrator is responsible for providing all administrative services relative to Plan operations including actuarial, accounting, rates, and policy forms. Ind. Code §27-7-2-28.1. Many of these services are reviewed and approved by IDOI.
Once an employer is assigned to a Servicing Carrier, the Servicing Carrier provides all of the normal services of a voluntary market workers compensation insurance carrier including premium collection, auditing and loss control. The employer and the Servicing Carrier interact in the same fashion as though the insurance had been procured in the voluntary market.
The most significant feature of the Plan is the method by which claims and losses are ultimately paid. While a Servicing Carrier provides normal insurance services for an employer in the Plan, the Servicing Carrier is not primarily liable for the losses and claims. All losses and claims incurred in the Plan are proportionately shared by all members of the ICRB as statutory reinsurers. Ind. Code §27-7-2-29. ICRB members' shares of these losses and claims are calculated based upon the members' gross premium written in the State of Indiana. Id.
27-7-2-29. Rejected risk - Designation of carrier - Premium - Reinsurance.
(a) When any such rejected risk is called to the attention of the worker's compensation board and it appearing to the board that said risk is in good faith entitled to coverage, said bureau upon the order of the board shall fix the initial premium for the coverage.
(b) Upon payment, of the premium fixed under subsection (a), the bureau shall designate a member of said bureau whose duty it shall be to issue a policy containing the usual and customary provisions found in such policies therefor. However, for this undertaking all members of said bureau shall be reinsurers as among themselves in the amount which the compensation insurance written in this state during the preceding calendar year by such member bears to the total compensation insurance written in this state during the preceding year by all members of said bureau.
The handling of insurance premiums is also unique to the Plan. While the Servicing Carrier collects the premium, it retains only a small percentage to compensate the Servicing Carrier for its administrative services. The percentage is determined by the ICRB with review and approval by IDOI. The balance of the premium is then collected by the ICRB and redistributed to ICRB members. ICRB members hold those premiums and utilize the monies to pay their share of the losses and claims incurred by the Plan. Frequently, loses and claims incurred in the Plan exceed premiums collected. As statutory reinsurer, ICRB members must fund any shortfall with company funds. No public dollars are involved in this process.
ADMINISTRATIVE, ACCOUNTING AND ACTUARIAL SERVICES
In order to minimize costs and maximize efficiency, the ICRB has formed relationships with the National Council on Compensation Insurance, Inc. ("NCCI") and Compensation Insurance Serices (CIS). NCCI is a not-for-profit company which provides accounting, actuarial and advisory rate making services to the workers compensation industry on a national basis. The ICRB has contracted with NCCI for certain services relating to the ICRB's Plan administration and advisory rate making functions. NCCI is paid a fee for its services by the ICRB. NCCI has no other role in Indiana. The ICRB's contractual agreement with NCCI has been reviewed and approved by IDOI. In recent years, the ICRB has been able to reduce costs as a result of its contractual relationship with NCCI.
ICRB has contracted with CIS to perform certain Pool administration functions including:
· Provide actuarial service and support (loss reserving);
· Process servicing carrier reports;
· Calculate Pool participation ratios;
· Litigation management;
· Prepare quarterly results for distribution to membership;
· Process Pool payables and receivables;
· Prepare bank reconciliation;
· Calculate Pool administrative expenses and allocate to appropriate policy years;
· Produce Pool profit and loss statements;
· Analyze reserves and distribute quarterly updates.
PERFORMANCE OF THE PLAN
The workers compensation insurance system in general, and the Plan in particular, has performed extremely well in Indiana. Rates have decreased while benefits have increased. More important, there has been a dramatic decrease in the Plan population from its peak of $102.8 million in 1991. By 1999 the number had fallen to about $10 million. Total plan premium increased significantly from 1999 to 2002, and peaked at approximately $67 million in 2005. By 2008, it had dropped to $34.1 million, and remained at approximately this same level through 2011. With the onset of a tightening market in 2012, the total plan premium increased dramatically to $52.7 million. It peaked again at around $70.2 million in September of 2014, and ended 2016 at $56.6 million. The ICRB has placed significant emphasis on ensuring the Plan is on firm financial ground to minimize risk to policyholders and members now and in the future.
The ICRB maintains detailed records of the results of the Plan. The records include audited financial statements prepared by nationally recognized accounting firms which are made available to all ICRB members and IDOI. More important, all ICRB members are provided quarterly statements which detail the performance of the Plan both current as of the date of the statement and projected into the reasonable future. Members may also contact the manager of the ICRB for additional information relative to Plan financial operations. The results of Plan operations are also provided to IDOI. IDOI also regularly attends ICRB meetings wherein Plan financial results are reviewed with members.