Insurers Voice Opposition to Conn. Workers’ Comp State Fund

March 14, 2006

The American Insurance Association (AIA) on Tuesday opposed legislation (SB 553) that would create a state workers’ compensation fund in Connecticut.

“If a state’s workers’ compensation insurance mechanism has become completely dysfunctional without the possibility of foreseeable recovery, then a state-created entity to handle the residual market might be justified,” said Steven Bennett, AIA assistant general counsel, in testimony before the legislature’s Joint Insurance and Real Estate Committee. “Fortunately, none of these circumstances are present in the Connecticut workers’ compensation market. Both the voluntary and residual markets are healthy and stable.”

“In healthy markets, such as Connecticut’s, there is neither any policy justification nor any necessity to create a state fund. Introduction of a state fund in a healthy market can only have a negative impact if the state-created entity eventually crowds out competitive private insurers from the voluntary market,” said Bennett.

“The bill would create an uneven playing field by providing the state fund with tax breaks and other advantages that are not available to voluntary market insurers. Such an imbalanced playing field would, over time, erode incentives to deploy capital to the Connecticut workers’ compensation market, which would have profound consequences for a competitive market. In the long run, any attempt to artificially curtail competition in the voluntary market would ultimately harm Connecticut employers,” concluded Bennett.

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