Worker's Compensation Insurance

25 Q: What exactly is a dividend plan? A: A dividend plan is a type of rating plan that allows an employer to share in the profits of its workers’ compensation insurer, in the form of a dividend. Because the employer participates in the profits of the insurer, dividend plans are often referred to as participating insurance policies. There are various types of dividend plans with different provisions and requirements. Under these types of plans, the payment of a dividend is typically contingent upon the profitability of the insurer, and may also be contingent upon the loss experience of a particular insured. An employer interested in pursuing other options to prospective rating (please see the “Prospective Rating” paragraph under the “How Is Workers’ Compensation Premium Calculated?” section), should contact its broker-agent for discussion and further information. All dividend plans must be submitted along with all other rating plan information to the CDI for approval. Q: Can an insurance broker-agent or insurance company guarantee the amount of a future workers’ compensation dividend? A: The California Code of Regulations (CCR) clearly states that broker-agents or insurance companies cannot guarantee or in any way promise the payment amount of future workers’ compensation dividends (see Title 10, Chapter 5, Subchapter 3, Article 9, Section 2504). A broker-agent, or other company representative, can provide past dividend payment amounts for illustration purposes, but the policyholder dividend statement cannot directly or indirectly imply the amount of future dividend payments. If an employer feels that a broker- agent or company representative is in any way misrepresenting its dividend plan, especially by directly or indirectly promising future dividend results, the employer should contact the CDI immediately through the information provided in the “Talk to Us” section of this brochure.