Texas workers' comp is optional — non-subscribers are part of the landscape
Unlike most states, Texas lets most private employers choose whether to carry workers’ compensation insurance; building or construction employers on contracts with governmental entities must cover each employee on the public project. Employers that opt out are non-subscribers, which fundamentally changes the risk profile and the conversations agencies need to have with prospects in the state. Understanding non-subscription is key to placing coverage and managing client expectations.
Non-subscribers in Texas are not protected by the state's workers' compensation law. That means if an employee is injured on the job, the employer can face direct liability — including lawsuits — that would otherwise be barred under the exclusive remedy provision in other states. Agencies must evaluate whether a client is a subscriber or a non-subscriber before submitting a risk to a carrier.
Texas rating: NCCI's plan with Texas exceptions
The Texas Department of Insurance (TDI) regulates workers' comp in Texas, and in 2014 the commissioner adopted NCCI's experience rating plan with Texas exceptions. Some Texas classification codes still differ from the NCCI code used elsewhere — for example, a hardware store that is 8010 in NCCI's list is 8017 in Texas.
So agencies cannot assume that a class code from another state will carry over directly: confirm the code that applies in Texas before submitting.
Non-subscribers are more vulnerable — and may seek coverage later
Non-subscribers in Texas may decide to purchase workers' comp coverage at a later date. This can lead to more complex submissions, as the carrier may evaluate the risk based on the employer's history of non-subscription. Agencies should be prepared to explain the implications of non-subscription and the potential cost to the employer if a claim arises.
Agencies can also look for opportunities to help non-subscribers understand the benefits of coverage, including the limit it puts on liability when an employee sues, and, for public building or construction contracts, the requirement to cover each employee on the project.
TDI oversight and carrier selectivity vary — understand the landscape
The TDI oversees the Texas workers' comp market and sets the rules for coverage, benefits, and employer obligations. This includes regulating the types of employers that can opt out of coverage and ensuring that carriers operate within state guidelines. Agencies should be familiar with the TDI's role and how it impacts carrier behavior in the market.
Agencies should expect some variation in underwriting timelines and requirements. It's important to communicate these expectations to clients upfront, especially if the business is transitioning from a non-subscriber to a subscriber.
Submission best practices for Texas workers' comp
When submitting Texas workers' comp risks, agencies should take the following steps to ensure smooth placement:
- Confirm the client's subscription status: Before submitting a risk, agencies should determine whether the client is a subscriber or a non-subscriber. This will affect the underwriting process and the types of coverage available.
- Confirm the Texas classification: Ensure that the business is correctly classified for Texas, where some codes differ from NCCI's list. Misclassification can lead to delays and carrier pushback.
- Prepare for potential underwriting questions: If the client is transitioning from a non-subscriber to a subscriber, carriers may ask for more information about the reason for the change and any prior claims history.
Before placing Texas risk through any wholesaler, confirm that the wholesaler and your agency both hold Texas licences. Licensing is state by state.
Managing client expectations in a non-mandatory market
Because Texas workers' comp is optional, client expectations may differ from those in other states. Agencies should be prepared to explain why coverage is beneficial, even though it is not required. This includes discussing the limit coverage puts on liability when an injured employee sues.
Agencies should also be transparent about the fact that coverage may not be available for all non-subscribers and that underwriting can be more complex. Setting realistic expectations helps avoid client frustration and ensures a smoother placement process.
