How It Works

Initial Contribution

The contribution (premium) for a member is determined by applying the regular workers’ compensation classifications and rates that are in effect as of the renewal date of the Association year. The member earns an experience modification which is computed utilizing the same formula as used by the National Council on Compensation Insurance.

Enrollment Procedures

The Member’s Enrollment Survey is the underwriting information needed in the application process. SIS does an initial review of this data and makes a recommendation as to whether the Association should accept the applicant. The Members’ Supervisory Board must then vote to approve or disapprove the prospect’s application.

The participating members are required to sign an indemnity agreement making them jointly and severally responsible for discharging their liabilities under the Virginia Workers’ Compensation Act. Risks are minimized by excess insurance put in place for the Association, and to date, there has never been a contribution (premium) assessment for any Associations administered by SIS.

Although this may seem like a complicated process, it is necessary to assure that the proposed applicant is the type that can contribute to the Association’s performance and success. The final approval will then come from the State Corporation Commission’s Bureau of Insurance.

Calculation of Surplus

Each member generates an equity schedule that shows each member’s annual contribution (premium) along with their portion of the investment income and other income that is earned as well as the expenses, paid losses, and reserves. The deficit allocation is the cost to other members of the Association when a member’s own contribution and other income is insufficient to cover his losses and expenses. If a member pays $20,000 in contributions and incurs $30,000 in losses, the funds to make up the difference are reflected in the deficit allocation and reduces the dollars available for surplus returns to the profitable members. This is just another reason why the Association’s underwriting requirements must remain strict.

Distribution of Surplus

Equity is the amount of money remaining in each member’s account to be returned in the form of surplus returns. The Association distributes the surplus and as approved by the Bureau of Insurance. A member’s equity balance continues to grow, due to investment income, while waiting for approval to make a surplus return.