Wednesday, April 8, 1998 | 11:14 a.m.
CARSON CITY -- When private companies are allowed in July 1999 to write workers' compensation policies, there will be plenty of competition.
State Insurance Commissioner Alice Molasky-Arman said Wednesday 64 companies have applied for a certificate to compete with the State Industrial Insurance System, which now has a monopoly.
And these potential competitors include some big names such as Farmers Insurance Exchange, Liberty Mutual Group, Travelers Indemnity, Employers Insurance of Wausau and Mid-Century Insurance.
Of the total, 52 already have a charter to operate in Nevada and 12 are new. Molasky-Arman told the legislative committee on workers' compensation she plans to issue licenses to sell workers' compensation policies by July 1, or one year before there is open competition.
This will give the companies times to develop their business policies, claims processing procedures and other practices that must be approved by the insurance commissioner.
Molasky-Arman said she isn't surprised by the large number of companies that want to compete. Douglas Dirks, general manager of SIIS, was out of state Tuesday but he has said in the past the system will be ready for competition.
SIIS has overhauled its claims processing system and updated its computers.
There won't be any rate competition at first between SIIS and the private insurance companies. The National Council for Compensation Insurance will recommend base rates to Molasky-Arman, who must make the final decision. She indicated she may hold a public hearing on the recommended rates before ruling.
In the first year of competition, rates of SIIS and private companies must be the same. In the second year, the rates can be 5 percent lower than the base rate set in 1999; companies can set their rates at 10 percent lower in the year 2001-2002 and 15 percent in 2002 to 2003,
These private companies, in their bid to draw customers away from the 44,000-member SIIS, will be able to stress service, better claims processing and dividend benefits.
Each private company will have to file at least a bond of $100,000 to protect their customers. And the bond requirement goes up with their business.
Meanwhile the legislative committee received a report from its staff on how SIIS is treated differently than private insurance companies in the law. For instance, SIIS doesn't have to hire licensed insurance agents to sell policies, as is required by private companies.
So far, SIIS hasn't had to pay many of the fees imposed on private companies. The law allows the insurance commissioner to suspend the license of private companies that repeatedly fail to follow the regulations. There is no similar authority for the commissioner to discipline SIIS.
There is no tie between the chief executive officer of a private insurance company and the state. In the case of SIIS, the governor appoints and sets the salary of the general manager of SIIS.
The committee must decide what recommended law changes to make to the 1999 Legislature.
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