An employer can demonstrate financial security in compliance with workers compensation laws by obtaining insurance from an assigned risk plan in which

• A. Employers typically have poor loss experience and cannot obtain insurance from private insurers.
• B. The amount of business assigned to each licensed insurer is in proportion to the insurer's profit margin in the voluntary market.
• C. Insurance rates are usually slightly higher than the voluntary market rates for comparable classifications.
• D. Employers might want to implement larger payroll deductions to be able to afford insurance in the voluntary market.

Answer: (A)

Assigned risk plans exist to provide workers’ compensation coverage for employers who can’t get private insurance because of their high risk. The key idea is that these plans serve as a backstop for those with poor loss experience, ensuring they meet financial security requirements and stay compliant with workers’ compensation laws. That makes the statement describing the typical situation—employers usually have poor loss experience and cannot obtain insurance from private insurers—the best answer. The other points describe features of the plan (like higher rates or allocation methods) or are less central to why an employer would use the plan in the first place.