SCF ARIZONA
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Find answers to your questions about SCF Arizona and workers' compensation insurance.
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Does SCF Arizona determine its rates?
What is SCF's market share?
Does SCF receive any financial support or money from the state or the general fund?
Is SCF a state agency?
What benefits do SCF employees get from the state?
Do SCF policyholders have an ownership interest in SCF assets?
Is SCF required to maintain a surplus?
Does SCF make a profit?
Are the dividends SCF pays annually typical of workers' compensation carriers?
Q. Does SCF Arizona determine its rates?
A. No. The National Council on Compensation Insurance,
based in Boca Raton, Fla., manages the nation’s
largest database of workers’ compensation insurance
information. NCCI analyzes industry trends and
prepares workers’ compensation insurance rate
recommendations to the Arizona Department of
Insurance. The DOI can accept, reject or modify the
NCCI recommendations. SCF Arizona can request a
one-size-fits-all, single deviation from the rate
the DOI sets.
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Q. What is SCF’s market share?
A. SCF Arizona has served the state for more than 80
years. Through the years, SCF
has proven to be a stable company that serves as an
economic engine statewide. This has led to
continued growth and customer loyalty. SCF insures
56,000 Arizona businesses, which is about 70 percent
of all Arizona employers. Eighty-two percent of
those businesses have 10 or fewer employees and
often are unable to find private carriers willing to
provide them with the statutorily required workers’
compensation insurance. SCF acts voluntarily as
the market of last resort, assuring access to
workers’ compensation insurance for all Arizona’s
employers.
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Q. Does SCF receive any financial support or money
from the state or the general fund?
A. No. When SCF was created in 1925 as part of the
Industrial Commission, the Arizona Legislature
provided $100,000 in “seed money,” with a
requirement that it be repaid by 1940. SCF repaid
the entire sum by 1938. Since that
time, SCF has received no financial support from the
State of Arizona. SCF is specifically exempted from
all of Arizona Title 35, which defines and controls
“Public Finances.” SCF was designed and continues to
operate so that it presents no liability to the
state. No
debt or liability of SCF ever becomes a debt or
liability of the State of Arizona.
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Q. Is SCF a state agency?
A. Not in the usual sense. SCF was created through
enabling legislation, has a Board of Directors
appointed by the governor, undergoes a budget
review by the Joint Legislative Budget Committee
and is required to submit to a legislative “sunset
review” every 10 years, but in most other respects,
SCF operates like a mutual insurance company with no
liability to the State. The Arizona Legislature
specifically exempted SCF from most links to the
State, including personnel. Like all workers’
compensation insurance carriers in Arizona, SCF is
regulated by the Arizona Department of Insurance and
the Arizona Industrial Commission.
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Q. What benefits do SCF employees get from the
state?
A. None. SCF employees participate in the Arizona State
Retirement System, as do school teachers, county
employees and others not considered to be State
employees. All other benefits SCF employees receive
are either self-insured by SCF or provided by
contract with outside vendors at SCF’s expense.
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Q. Do SCF policyholders have an ownership interest
in SCF assets?
A. No. SCF’s assets, as designed by statute, are
premiums collected and the income on investment of
those premiums. SCF manages the assets in the nature
of a trust for the benefit of SCF policyholders and
their employees. Arizona law prevents the use of
those assets for anything other than the purposes
set forth in the Workers’ Compensation Act.
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Q. Is SCF required to maintain a surplus?
A. Yes. SCF, like all other insurance carriers, is
required by the Arizona Department of Insurance to
maintain sufficient levels of surplus to ensure
financial solvency. If SCF does
not maintain sufficient levels of surplus, the DOI
must, by law, take corrective action.
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Q. Does SCF make a profit?
A. No. By statute, SCF shall be “neither more nor less
than self-supporting.” This has been interpreted to
mean that SCF is “nonprofit.” Any year-end net gain
that is not needed for payment of claims,
administrative costs or reserve and surplus
requirements is returned to policyholders in the
form of dividends. No dividends are guaranteed and
all must be declared by the SCF Board of Directors.
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Q. Is SCF required to pay taxes?
A. Yes. Like other workers’ compensation carriers, SCF
is required to pay premium taxes. It also pays
property taxes on the real estate and vehicles it
owns. However, SCF does not pay federal income taxes
because the IRS exempts state compensation funds
that operate as the carrier of last resort, which
SCF does voluntarily.
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Q. Are the dividends SCF pays annually typical of
workers’ compensation carriers?
A. No. Private insurance companies are for-profit
businesses with shareholders or policyholders as
owners. The objective of private insurance companies
is to pay profits to their owners. The owners may or
may not be residents of Arizona. SCF returns any
excess “profits” to qualified policyholders, all of
whom must operate in Arizona. Therefore, all
dividends that SCF pays stay in Arizona.
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