Workers' comp state funds now control a quarter of the insuredworkers' comp market, despite the fact they only write in 25states, according to a new study by Conning Research andConsulting.

The study, “Workers' Compensation State Funds: Evolution of aCompetitive Force,” analyzes the role of state funds and theircompetitive positioning versus the traditional workers'compensation marketplace, and alternative forms of workers'compensation risk financing. The study reviews state funds'financial and market share results, their effects on the overallmarket and prospects for future growth.

“In comparison to the industry as a whole, state funds' lossratios are higher, but they compensate with lower expenses andincreased investment income,” said Mark Jablonowski, analyst atConning Research & Consulting.

He said that operating results are on par with the rest of theworkers' compensation industry. As for why state funds have shownsuch strong financial results and grown so rapidly, Conning pointedto their dedication to loss prevention and control.

“Our research indicates that a key to the state fund success maywell be their dedicated approach to loss prevention and control,”said Stephan Christiansen, director of research at Conning. “Theirmission often includes shared responsibility for health and safetywith other state agencies, and so they often incorporatestate-of-the-art loss prevention initiatives with financial rewardstied to the insured's loss performance.”