Did you know a worker’s compensation fund is available for your employees? Unfortunately, even a state heavily reliant on agriculture for its economic health, too few are aware of the option.
It may also come as a surprise that 2017 marks the 25th anniversary of that fund.
Associated with the Agricultural Council of Arkansas (Agcompsif.com), in late January, leaders of the program spoke with Delta Farm Press about the program’s longevity, operation and future. Among their comments:
On the worker’s comp program genesis…
Andrew Grobmyer, executive vice president, Agricultural Council of Arkansas: “Our program started back in the early 1990s through the Ag Council of Arkansas network in coordination with a similar group in Louisiana, the Louisiana Cotton and Grain Association. Some of our Ag Council leaders studied the Louisiana Agricultural Compensation self-insurance fund (LAC SIF) program and quickly determined that the model had potential to work for members of the Ag Council.
“We’ve been very pleased with the performance of the Arkansas program, and it’s been a huge success for agricultural businesses in Arkansas for 25 years now. We are excited about the 25th year milestone, but we are focused on keeping the momentum going for the next 25 years-plus.
“We ultimately want all legitimate, eligible employers to discover the benefits of this group and to ensure they’re not overly exposed to the known potential dangers of workplace injuries.”
Hal Hyneman: “When we wanted to set something up in Arkansas, (we went to) Terry Duke, our fund manager, who already had a program up and running in Louisiana. A gentleman named Jack Hamilton was also involved. At that time, the insurance market was very tight and was hard for worker’s comp.
“As a personal example, our business was paying, roughly, a $52,000 annual premium. The idea was floated: ‘We can form and run this worker’s comp group with homogenous risk in a manner similar to a co-op. It’s worked really well in Louisiana and there’s no reason to think it won’t in Arkansas.’
“(The Ag Council’s) Bill Baxter was good friends with Hamilton and they got together with (former Ag Council leader) Cecil Williams. We formed an alliance with (Duke) since he had experience doing this already.
“It was a good time to start a program because the cotton ginning rate was strong and there were many gins in the state. But the gins were having a hard time getting insurance coverage at reasonable rates.”
A leap of faith
Hyneman: “When you’re first starting something like this, people have to take a leap of faith. There are some things about this that are different than buying from a commercial insurance company. But, in 1992, we got the founder’s group on board and ended up writing about $1 million in business. Doing that right out of the gate was a godsend because it allowed us to have some working capital.
“That first year, the program went favorably and it’s done exactly what it was designed to do ever since. It brought our worker’s comp premium down precipitously. It’s nice to get a check every year — when you pay the premiums for a couple, three years, you begin to see a plowback of your money.
“Those first few years, the program was driven largely by cotton gins. Now, it’s evolved and there are many benefits for farmers being involved. Back then, farmers were typically buying ‘employer’s liability.’ Compared to worker’s comp, that doesn’t provide nearly the level of coverage for the farmer or his employees.
“(Duke) has always delivered what he’s said. He and our board have done a really good job of managing the program and, as a result, we’ve had great financial success that’s benefited our members. It puts money in their pockets as the fund exceeds expectations.”
On the program’s development over the last few years…
Hyneman: “What we’ve seen is as the volume of cotton grown has contracted, the gins are ginning fewer bales and their payrolls dropped. So, we’ve seen a sort of changing of the guard from this program being driven by cotton gins to an expansion of producers and affiliated ag sectors. We’re not experiencing huge growth but we certainly aren’t seeing shrinkage, either.
Grobmyer: “As cotton acres have declined, grain acres have risen and there’s more and more on-farm storage. That’s changed a lot of the way farm operations work. Grain bins and other storage terminals on the farm have led more growers to consider (worker’s comp) coverage.”
Terry Duke: “What’s happened in Arkansas is similar to what we’ve seen with the Louisiana program. In a sense, the programs were started by agribusiness — the gins, oil and rice mills, the grain elevators, etc. With consolidation of those industries, farms have begun to take over the programs. There are almost 230 farm members, which dwarfs the rest of the membership.”
On how the program works…
Hyneman: “There are easy examples of (members) with claims that would have been ruinous if they had employer’s liability instead of worker’s comp. Sometimes you have calamitous injuries that worker’s comp can handle on an unlimited basis instead of having an employer’s liability limit.
“Sometimes medical costs on the injuries alone will exceed the employer’s liability amount. If that’s all an employer has, he could be putting all his assets — I mean everything — at risk. With worker’s comp that isn’t a concern.
“We have a superior (insurance) product. It’s up to us to get out and educate people why that’s the case. Once you lay the facts out, they see the costs aren’t that different. Show people how they can protect their assets from a lawsuit and most will quickly see the light.”
Grobmyer: “From migrant labor, there is a requirement to carry worker’s comp. So, any H-2A ag workers must be covered. Ag comp is a good option for these employers and employees too.”
A case study…
Duke: “We had a young man who was just out of high school and, through no fault of his own, had a building collapse on him. He’s basically in the same situation as Christopher Reeve — quadriplegic, living on a ventilator.
“Through worker’s comp, we’ve done everything from retrofit his home, put in a storm safe room, put in an automatic generator since he’s on a ventilator. It may cost $10 million to help this man with a lifetime of medical benefits.
“If the employer had only had liability coverage and was sued in tort, it could be a $20 million-plus claim. There aren’t many people out there carrying $20 million in coverage.”
Hyneman: “We carry reinsurance on the program. When you hear ‘$10 million,’ our fund doesn’t absorb that amount. Currently, with the reinsurance contract, the most we’ll absorb for any single claim is $750,000. So, we pay another insurance company to take on the risk over and above the amount we retain on the first level.
“That’s important for people to understand, because they’ll say, ‘Well, y’all aren’t big enough to pay out $10 million or $20 million claims.’ Reinsurance with a large, solid company protects our fund from extreme losses.”
Duke: “Every state has its own worker’s comp law. We have a loss control guy who goes out and meets with our farmers. We try to make sure our farmers know what the law says.
“There are certain limitations within the laws. For example, employers have a right to operate a drug-free work place. So, we try to stress to our members the importance of a drug and alcohol program. If an employee gets hurt and drugs and alcohol contributed to the accident, the claim might be denied.”
How does one become a member of the worker’s comp group?
Duke: “It’s a fairly easy process and can be done in 10 days, or so. They contact us and we send a questionnaire asking what kind of business they operate. If they farm, we ask what crops are being farmed, acreage, and other general farm business information. What’s been your prior insurance experience? Most of the farmers who come to us have never had worker’s comp before.
“One thing we ask for periodically is a copy of financials. That isn’t to be intrusive, but we can’t have a lot of broke people in the program. That’s actually a requirement of the state.
“Once they fill out the form, we may need referrals. If everything is in order, we’ll give them a price quote based on payrolls and everything. If they agree, papers have to be signed and others filed with the state within 15 days.”
Hyneman: “We handle all the legwork. The applicant doesn’t have much to do beyond supplying info and signing papers.”
Who is the program open to?
Duke: “Our membership is made up of gins, cotton warehouses, oil mills, feed mills, seed merchants and grain elevators, implement and equipment dealers, farm supply companies, and other ag-related businesses. We have a member who drills wells but we don’t write aerial applicators.”
Grobmyer: “We have some specialty, non-traditional sectors involved, as well. The edamame industry recently took off in Arkansas. There are also some specialty rice mills, the peanut operations, aquaculture and sweet potato producers participating.”
Duke: “Almost all of our industries have trucking involved. So, we have some trucking exposure in the program.
“We have had a dedicated claims staff for years. One of the beauties of that is we have some employees that move from place to place and may be trying to beat the system. What works to our advantage is they end up with the same claims people and we know their M.O. We give everyone the benefit of the doubt until we find those trying to beat the system. Then, we’re dogmatic about protecting our members from paying claims we don’t owe.”
Where will you take this in five years? 25?
Hyneman: “We’re trying to get as many members as possible. We want as close to 100 percent of farm employers and other in-state agri-businesses as we can get.
Duke: “For so many years, farmers in Arkansas have known they don’t have to carry worker’s comp. Keep in mind, the employer’s liability isn’t separate coverage — it’s part of their general liability they buy every year. So many people are on autopilot and haven’t thought about the differences in coverage.
“Usually, if we can get one-on-one with someone and go over the differences they’ll (go with worker’s comp). But it’s more difficult if we can’t talk to them before the time comes to renew their coverage.
“I think we’re only looking at the tip of the iceberg. Arkansas is a much larger agricultural state than Louisiana, where it’s mandatory that farmers buy worker’s comp coverage. More than 50 north Louisiana farms are involved in the program. And we only have 230 in the whole state of Arkansas? There should be twice as many. We believe we will get there.”
On the program’s structure…
Duke: “We report to a board of directors elected by co-op members. These nine guys are excellent businessmen who serve without any compensation whatsoever. So, our overhead isn’t nearly as high as that of an insurance company.”
Grobmyer: “The worker’s comp group came about from a group of ag business leaders who were also engaged in the Ag Council of Arkansas. Those two groups have partnered to provide a benefit to the state. The Ag Council helps promote and endorse this program. Participants are required to have an Ag Council membership.”
Terry Duke: email@example.com or (800) 798-2999
Agent Bobby Davis: firstname.lastname@example.org
Agent David Crigler: email@example.com