Workers' Compensation for Local Government Entities in Tennessee

February 2025

Full report
Snapshot

During the 2024 legislative session, the General Assembly passed legislation requiring the Comptroller’s Office to conduct a study of the workers’ compensation insurance market for local government entities in Tennessee.

This OREA report analyzes the process for local government entities to obtain workers’ compensation policies, compares rates and rate setting policies between insurance pools and commercial insurance providers, and reviews two key solvency indicators for insurance pools and one for commercial insurance providers.

The report found that:

• insurance pools offer different interpretations of statute for their exemption from the public bidding process (local government entities are not required to bid for insurance coverages from a pool but are required to bid for coverages provided by commercial carriers);
• commercial workers’ compensation rates have fallen more steadily than those of insurance pools; and
• over the past decade, all three insurance pools showed mixed performance on operating income and unrestricted net position, two key solvency-related metrics, which merits further investigation.

The report includes the following policy considerations:

• The General Assembly may wish to clarify insurance pools’ exemption from the public bidding process.
• The General Assembly may wish to have a state presence on insurance pools’ boards of trustees.
• The General Assembly may wish to grant the Department of Commerce and Insurance rate review authority over insurance pools.
• The Department of Commerce and Insurance should evaluate local government insurance pools’ reserves.