In the years prior to 1993, workers' compensation insurance was not a pleasant topic of conversation in Rhode Island. The state was ridiculed in national publications as the second most expensive for premiums, and the unfunded assigned risk pool liability was reported to be $600 million. To make matters even worse, insurers were requesting a 123 percent rate increase.
In the few short years since, the situation has been turned around completely. Today, the workers' compensation situation in the state is stable, economical, and a model that other states are studying. What happened to change things was the creation of Beacon Mutual Insurance Co., which began as a state fund with a single employee. It now has 100 employees and insures more than 10,000 companies in the state.
In 1990, as Rhode Island's workers' compensation crisis worsened, a State Compensation Fund was created to write $12-15 million in premiums in the voluntary market. The Fund later changed its name to Beacon Mutual Insurance Co. when it became a mutual nonprofit company.
In 1992, shortly after the last remaining private insurer in the state canceled the policies of thousands of insureds, the Legislature passed the Workers' Compensation Reform Act. The Beacon began assuming responsibility of the assigned risk pool by writing $18 million in premium in January 1993. By the end of 1993, premiums from 10,480 policies reached $119 million, an enormous accomplishment for a company that had one employee only two years earlier.
The Beacon remains Rhode Island's largest workers' compensation insurer, although other insurers are now re-entering the state's market. Through its on-site inspections of work environments and recommended safety -- or loss-control -- procedures it has helped thousands of companies to both reduce claims and improve the productivity of their workers.
The results have been better than expected. There are fewer claims today and, when accidents do happen, reports are filed promptly to allow early intervention by the insurer.
Being a mutual nonprofit company with more than $200 million in assets, such improvements mean cost savings for member companies. Surpluses which The Beacon enjoys at the end of the fiscal year are returned to the owners next year in the form of lower premiums.
The Beacon has been instrumental in lowering the cost of doing business in Rhode Island. Though it got its start from a loan -- and enabling legislation -- it has gone on to become an independent mutual company, owned by its policyholders, and viewed as one of the most successful workers' compensation programs in the country.
"Other states now look at our system, as they seek to implement their own State Insurance Fund." Donald G. Vass, president and CEO, wrote in a recent letter to members. "We are proud of our role in the transformation of Rhode Island workers' compensation."
