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The State Compensation Fund
audit report presents information about the Fund’s efforts to adjust to a highly
competitive workers’ compensation insurance market. Although the Fund remains the
major provider of workers’ compensation insurance in Arizona, competition has reduced
the Fund’s market share and premium earnings. In 1995, the Fund collected
approximately $334.5 million in premiums, or nearly 50 percent of the total $671.6 million
paid to all workers’ compensation carriers. Since then, premium rates have steadily
declined as have total premiums paid to all workers’ compensation carriers in the
State. In 1997, employers in Arizona paid workers’ compensation premiums of
approximately $563 million. Of that total, the Fund collected approximately $228.7
million, or about 41 percent.
In response to the current competitive market, the Fund is
taking several steps to attract and retain policyholders. Specifically, the Fund reduced
its premium rates in July 1998 and has developed programs to improve services offered to
current policyholders. The Fund is also working to reduce its budget by 25 percent, or
approximately $11.7 million, between 1998 and 2000. Finally, the Fund is reviewing each of
its major functions, and this review is expected to result in further savings through
improved efficiency. Because the Fund has implemented, or is in the process of
implementing, a number of process improvements and operational changes, no recommendations
for additional actions are offered in this audit report.
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