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AZ State Compensation Fund to Be Privatized by 2013

Source: Business Journal

Posted on 14 May 2010

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Arizona Governor Jan Brewer has signed into law a bill to privatize the State Compensation Fund.

The law directs SCF Arizona to become a mutual insurance company by January 2013. SCF provides workers’ compensation coverage to 40,000 Arizona businesses, which are required by state law to provide such coverage for employees injured on the job.

Arizona Senate President Bob Burns, who sponsored Senate Bill 1045, said SCF has weaned itself from state oversight.

“I just think the time is right for making them a private company and removing the state from any expenditures or liabilities we have inherited over the years,” Burns said in a prepared statement. “This action reduces the role of government, and it bolsters the private sector.”

The Phoenix-based entity employs 500 people. SCF pays premium and property taxes, but has not received state money since its legislative startup funds when it was created in 1925. That loan was repaid by 1938, two years before its due date, and SCF has been self-sufficient since then.

Privatization will allow SCF to provide stable rates and broaden its services. For example, it will be allowed to expand into other states, something that was prohibited before.

With $191.8 million in direct premiums written in 2009, SCF Arizona is the largest workers’ compensation carrier operating in the state, taking a 31.5 percent market share, according to the Arizona Department of Insurance.

One of its subsidiaries, SCF Premier Insurance Co., is the second-largest, with $34.1 million in 2009 direct premiums written. Another subsidiary, SCF Western Insurance Co., is the 10th-largest, with $10.7 million in 2009 direct premiums written.