What Is the State Compensation Insurance Fund?

The State Compensation Insurance Fund (“State Fund”) is a California body that competes in the marketplace for employers purchasing workers' compensation insurance. In addition to being the insurer of last resort for those employers who cannot secure coverage from a private carrier, it maintains an open-door policy, competing in the workers' compensation insurance marketplace, but only for California employers. On average, it’s insured about a fourth of all workers in California since its inception in 1914. Established by the California legislature pursuant to a 1913 amendment to the State Constitution, the State Fund is not a branch of the government.

Workers' compensation is insurance that covers injuries and illnesses contracted in the workplace or in transit to or from the workplace. Called workers' comp in the US and compo in Australia, it pays for medical treatments, physical rehabilitation services and any other medical services or equipment related to treatment, as well as income replacement. Workers who receive benefits must forego their right to sue their employer for any negligence that may have led to the injury.

All employers operating within the US are required to secure workers' compensation insurance coverage, and requirements are similarly strict in other industrialized nations. The requirements and specific regulations are established by the individual states. In some states, this type of insurance is available only from private insurance carriers. Others establish state-sponsored monopoly insurance companies from which all employers must secure workers' comp insurance.

Many American states utilize a hybrid approach, allowing employers to purchase workers' comp insurance in the private market but offering a state-sponsored carrier as well. Some of these state-sponsored carriers exist only as insurers of last resort. California’s State Compensation Insurance Fund, like a handful of others, competes in the insurance marketplace but avoids pushing private carriers out of the market by operating as a not-for-profit carrier. In addition, State Fund’s open-door policy ensures that all employers are able to obtain the required coverage.

In addition to providing workers' compensation insurance, the State Compensation Insurance Fund is intended to serve as a model for private carriers. Thus, in addition to its insurance program, State Fund also offers education and training services for employers, under the general heading of safety and health services. These services include site visits, air sampling, and ergonomic evaluations, as well as provision of manuals, educational pamphlets and safety sheets. The State Compensation Insurance Fund also works with employers to help them become compliant with OSHA requirements. Other carriers frequently provide similar services, with the objective of reducing claims by reducing injuries on the job.