A new Maryland law taking effect Oct. 1 will hold the Injured Workers’ Insurance Fund to a majority of the same standards as other domestic insurers.

Established in 1914, IWIF is a fully self-supporting insurance company that operates solely from premium and investment income. Towson, Md.-based IWIF provides workers’ compensation coverage to about a quarter of the state’s businesses and serves as the insurer of last resort for businesses that cannot obtain coverage in the private market.

Among the stipulations, outlined in SB 959, as passed by both houses of the General Assembly, IWIF will be subject to state insurance law provisions for third-party administrators and will have its rate-making practices reviewed every five years.

The insurer must also pay an annual assessment to the Maryland Insurance Administration‘s Insurance Regulation Fund, but does not have to pay a premium tax charged to other insurers.

IWIF maintains rate setting

IWIF will not have to join the National Council on Compensation Insurance and adhere to its policies because it has a rate-setting mechanism in place.

Dennis Carroll

“We thought it was a reasonable compromise between recognizing IWIF as an insurance company and protecting the public, while maintaining our historic practice to set our own rates,” Dennis Carroll, executive vice president and general counsel at IWIF, told IFAwebnews.com.

Maryland Insurance Commissioner Ralph S. Tyler said he testified in support of the legislation and changes to IWIF’s status accomplish two important things.

“One, it clarifies in state statute IWIF’s role and mission as both an insurer of last resort and a competitive insurer, and I think that has been a source of ambiguity and debate,” he said. “Two, it subjects IWIF to greater oversight from the insurance administration.  I think it is in everyone’s interest given their importance in the marketplace.”

Insurer to ‘pay our fair share’

Carroll estimates that IWIF’s contribution to the Insurance Regulation Fund will likely be about $100,000 per year.

“It’s an expense, but we feel it is fair to do,” he said. “We are regulated by the MIA and should pay our fair share. It’s the cost of doing business in Maryland.”

As for exclusion from the NCCI, Carroll said IWIF pre-dates the creation of the national body by eight years and has well-established practices in place.

“We are not in the NCCI and never have been, so we are able to create our own systems for rate making,” he said. ” It’s systematically sound, but different [than NCCI].”

Other “minor” changes resulting from the law noted by Carroll include paying IWIF’s nine-member board of directors on a biweekly rather than a semimonthly basis, and requiring the body to adopt policies, not regulations, to implement the law.

This story originally appeared in the June 2009 print edition of Insurance & Financial Advisor.