Impact of Changes - Industry Perspective
INTERIM COMMITTEE TO STUDY ISSUES RELATED TO PINNACOL ASSURANCE
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10:16 AM -- Impact of Possible Changes
The panel to discuss the industry-perspective impact of possible changes to Pinnacol Assurance on the Colorado workers' compensation market included Mr. Bruce Wood of the American Insurance Association, Kelly Campbell of the Property Casualty Insurers (PCI) of America, and Brandon LaSalle of both the Colorado Insurance Guaranty Association and the National Conference of Insurance Guaranty Funds. Attachments D, E, and F were distributed to committee members. Mr. Wood explained there is a gradual trend for state workers' compensation programs to transition to private, and consequently, there are several important steps that needed to be taken. He discussed the policy considerations from an outline he handed out (Attachment D), nothing that many states were in a situation where they were gravely in debt. He testified that the threshold question asked in Nevada was whether providing workers' compensation was a core function of state government. He further explained if it were to be state sponsored, a state fund should be placed on a more level playing field that it is on now and pay state and federal premium taxes. If it is going through privatization, Nevada's experience is a very good model.
Mr. Wood continued discussing residual market mechanisms of other states. Some states transition more easily, but others, like Florida, had difficulty. Ms. Kelly Campbell continued by explaining the purpose of Property Casualty Insurers (PCI). Ms. Campbell gave an overview of Pinnacol's structure. She explained, from PCI's perspective, Pinnacol is a hybrid company. There are some ways that Pinnacol is like a state agency, and ways that it is not like a state agency. She referred to Attachment E, which provides details on the differing structures, including state agencies, hybrids, and full privatization. Ms. Campbell explained some of the problems associated with keeping Pinnacol as a state agency and further explained the benefits of privatizing.
Mr. Brandon LaSalle provided background on how the Guaranty Fund program works. He explained the different types of insurance that can and can't be included in the Guaranty Fund. He discussed the Colorado Insurance Commissioner's responsibilities, especially if there are problems with an insurance company. He further explained the liquidation process. Mr. LaSalle provided an additional handout that offered some basic statistics on the assessment history (Attachment G). If Pinnacol was to be a state agency, it could be included in the Guaranty Fund.
Questions ensued, beginning with Mr. Ken Ross, regarding restructuring. Mr. Ross clarified the status of Pinnacol, that it is regulated by the Colorado Division of Insurance, like all other insurance companies. The committee expressed concern regarding the coverage of high risk employers. Mr. Wood explained we still would have a system, albeit different, that would cover all workers. He further explained that Pinnacol serves a very important purpose that, if dissolved, would need to be replaced. Senator Harvey asked about how Pinnacol was being managed and asked if there were better ways for it to be managed and if there was a better model to follow. Ms. Campbell explained some of the differences between different types of insurance. She continued to explain some of the components of property and casualty insurance as autos, homeowners, and other insurance.
Representative Cheri Gerou stated that Colorado requires workers' compensation for all employees and noted states have different mechanism for covering all employees.