Agency: ISF - Administrative Services

Line Item: ISF - Risk Management

Function

The Division of Risk Management was organized in 1980 to implement a self-insurance program for the state. The division provides liability, property, and auto physical damage coverage to all state agencies and school districts, many charter schools, and all state-owned colleges and universities. The division also offers an Owner Controlled Insurance Program (OCIP) to provide optional insurance on construction projects; however, due to the lack of interest and funding concerns, the division will phase out this program. The division also acts as an agent in purchasing aircraft insurance for various state entities that have airplanes or flight instruction programs, but does not provide medical malpractice coverage at the University of Utah.

Statutory Authority

UCA 63A-4 outlines the duties and powers of the division. Duties include:

• Acquire and administer all property, casualty insurance, and workers' compensation insurance purchased by the state
• Make rules setting forth reasonable underwriting and risk control standards, risks that will be covered by the Risk Management Fund, eligibility for payments from the fund, procedures for making claims, and procedures for settling disputes
• Implement a risk management and loss prevention program for state agencies
• Work with state agencies that manage and protect state property, such as the state fire marshal or DFCM
• Maintain necessary records
• Manage the Risk Management Fund according to economically and actuarially sound principles
• Purchase insurance or reinsurance as necessary
• Submit rates and fees to the Rate Committee and Legislature for approval

The division may:

• Enter into contracts
• Purchase insurance
• Adjust, settle, and pay claims
• Pay expenses and costs
• Study the risks of all state agencies and properties
• Issue certificates of coverage to state agencies
• Make recommendations to state agencies
• Prescribe insurance and liability provisions to be included in all state contracts
• Review building plans and make recommendations
• Spend monies from the Risk Management Fund (created under UCA 63A-4-201

UCA 63A-4-204 through 205.5 allow school districts, charter schools, and the Utah Communications Agency Network to participate in the Risk Management Fund.

Performance

Since FY 2001 Workers' Compensation had intentionally kept premiums low in order to reduce retained earnings. This trend changed in FY 2005. Revenues increased in FY 2006 because the payroll rate increased from 0.82% to 0.86% for non-UDOT state agencies, and the Legislature funded a COLA increase on which the rate was applied. Expenditures, however, didn't rise as expected in FY 2006 because of an unanticipated $671,800 refund received from the Utah WCF. In FY 2007, the expenditures did increase to levels sufficient to decrease retained earnings. These costs/refunds are difficult to estimate. Medical costs continue to increase and the number of accidents is unpredictable.

Funding Detail

The following table summarizes funding for the two programs in this line item. Restricted Revenue represents collections of Workers' Compensation premiums.

Program: ISF - Risk Management Administration

Function

The Administration Program includes liability, property, and auto physical damage coverage. The liability insurance and auto physical damage programs are entirely self-insured, while the property insurance program is self-insured up to a $3.5 million aggregate yearly deductible with private insurance being purchased for amounts in excess of the deductible.

The Risk Management Fund handles claims against the state. The State Risk Manager makes final determinations on claims management, defense, and settlements.

During the 2006 General Session the Legislature passed S.B. 113, increasing the state's government immunity aggregate cap from $1,167,900 to $2,000,000.

Funding Detail

All revenue comes from insurance premiums or interest earned. The Legislature may return excess retained earnings to the General Fund.

Program: ISF - Workers' Compensation

Function

The Workers' Compensation program is a pass-through of workers' compensation expenses paid by the state and its employees to the Workers' Compensation Fund of Utah, which provides coverage to employees on the state's payroll system. Higher education and school districts are not included in the program. The state collects monthly rates from employees' paychecks to pay the premiums billed by the Workers' Compensation Fund of Utah.

The fund supports two employees who work to reduce Workers' Compensation exposure and to increase risk-awareness by employees in an attempt to reduce accidents and therefore reduce claims. The fund also pays state agencies for half of approved expenses for ergonomic furniture, keyboards, and similar injury-preventing items for employees.

Funding Detail

Restricted revenue in this program comes from Workers' Compensation premiums.