From: Captive Insurance Times
Industry professionals discuss how a captive can be used to provide coverage for the long-tail risk of workers’ compensation, and how the COVID-19 pandemic has impacted this market
Workers’ compensation refers to the provision of benefits to workers who suffer injury or illness while on the job. This can take the form of medical treatment for work-related conditions, cash payments to replace lost wages, temporary total disability benefits, or vocational rehabilitation benefits, according to the US Social Security Administration.
Agnes Hoeberling, CEO of InterCare Holdings, explains: “Workers’ compensation is a type of insurance coverage that is required for all businesses to cover their employees when they are injured on the job or become ill from their job. Benefits include payment for lost wages from time off work to recover from the injury or illness, medical treatment, disability benefits from permanent impairment, money for retraining, and death benefits.”
Before workers’ compensation laws were introduced in the US, an injured worker had no other option but to bring a tort suit against their employer to prove employer negligence caused the injury. Although it was unlikely that employees would recover damages, employers also disliked this system as they were at risk for substantial and unpredictable losses if the employee’s suit was successful.
Therefore, both sides favoured the introduction of state programmes on the basic principle that benefits would be provided to injured workers without regard to fault, while in return employers would face limited liability.
Although the Employers’ Liability Acts mitigated the defence of contributory negligence, it fell to the states to take responsibility for designing and administering workers’ compensation programmes.
Across states, programmes vary in terms of who is allowed to provide insurance, which injuries and illnesses are compensable, and the level of benefits. State laws generally require employers to obtain insurance or to prove they have the financial ability to carry their own risk.
Jason Wheeler, vice president, national sales and account management, CorVel, notes: “Almost all states require that employers have workers’ comp insurance. A majority of employers buy workers’ comp insurance coverage through private insurers or state-certified compensation insurance funds.”