(a) With respect to the servicing carriers appointed by the plan administrator and approved by the Insurance Commissioner, the following shall apply:

1. (1) Eligibility to act as a servicing carrier.

   1. (A) The plan administrator shall establish written requirements that insurers must meet in order to be eligible to act as a servicing carrier.
   2. (B) Those requirements shall consider, among other things, the insurer's:

(i) Financial standing;

1. (ii) Availability of resources;

   1. (iii) Length and quality of experience in the state writing workers’ compensation insurance;

      1. (iv) Market share; and
      2. (v) Demonstrated compliance with the mandates of Arkansas Code § 23-67-201 et seq.
   2. (C) From among those insurers that are eligible and have applied to act as a servicing carrier, the plan administrator shall appoint a sufficient number of servicing carriers as are needed to handle the assignments made pursuant to this plan.
   3. (D) The plan administrator may terminate the servicing carrier status, subject to the approval of the Insurance Commissioner, of any insurer that fails to meet the servicing carrier requirements on a continuing basis.
   4. (E) During the first year this plan is in effect, any insurer that is qualified as a servicing carrier under any similar plan that was previously in effect in this state and continues to be qualified as of the date this plan takes effect will be deemed to be a qualified servicing carrier under this plan;

2. (2) Quarterly operations report.

   1. (A) Each servicing carrier shall provide a quarterly report to the plan administrator in such format and at such time as determined by the plan administrator.

   2. (B) This report, among other things, shall provide information on the servicing carrier's operations related to plan business in the following areas:

      1. (i) Underwriting;
      2. (ii) Auditing;
      3. (iii) Claims;
      4. (iv) Loss control;
      5. (v) Premium collection; and
      6. (vi) Customer service;

3. (3) Standards for servicing carrier performance, compensation, and incentives.

   1. (A) The plan administrator shall, with the approval of the commissioner, establish written minimum levels of acceptable performance for servicing carriers and shall establish procedures for measuring servicing carrier performance.
   2. (B) Servicing carriers shall manage losses in compliance with the performance standards established hereunder.

   3. (C) The plan administrator shall also establish the compensation for servicing carriers, which shall take into consideration, among other things, provisions for:

      1. (i) Rewarding servicing carriers for positive action targeted at reducing losses and costs;
      2. (ii) Disincentives for inefficiencies and poor service; and
      3. (iii) Servicing carrier capacity.
   4. (D) And, in accordance with Arkansas Code § 23-67-204(k), the performance plan shall provide that up to thirty-three percent (33%) of the servicing carrier's remuneration shall be based upon how well or how poorly it complies with the standards for servicing carrier performance, including particularly, but not limited to, a review of collected premium as versus written premium and by review of loss ratios of its book of business and degree of improvement therein.
   5. (E) Such compensation system shall be made effective with respect to and shall apply to all servicing carrier contracts effective on or after September 1, 1993.
   6. (F) The plan administrator, as approved by the commissioner, shall on an equitable and consistent basis provide that those moneys that would otherwise have gone to servicing carriers that did not perform up to an acceptable standard shall be distributed amongst those servicing carriers that met or exceeded the performance standards;

4. (4) Each servicing carrier shall continually employ such number of qualified administrative personnel and dedicate such equipment and facilities to the administration of the Arkansas Workers' Compensation Insurance Plan as the commissioner, in his or her reasonable discretion, deems adequate to service the needs of the plan, and, further, the standards for servicing carrier performance shall include a requirement that each of them shall:

   1. (A) Provide a level of service equal to that provided to employer-insureds in its voluntary workers’ compensation line of business and assure same by putting into effect internal administrative procedures that shall assure that such is the case;
   2. (B) Maintain with the commissioner a list of responsible management personnel of the insurer qualified to make administrative decisions on the insurer's behalf concerning policies issued within the plan;
   3. (C) Keep the commissioner continually advised of the address and telephone number of the insurer's office servicing the plan on its behalf;
   4. (D) Maintain a toll-free telephone number or numbers adequate to service the plan and keep the commissioner, employers, the Workers’ Compensation Commission, and producers continually apprised of same;

   5. (E)

      1. (i) Establish a program and procedure whereby such carriers shall not make ultimate determination as to joint settlement of claims without consulting with the employer insured.
      2. (ii) Nothing herein shall be deemed to alter or abridge the servicing carrier's ultimate right and authority under the law and contract to handle and determine the defense of workers' compensation claims;
   6. (F) Maintain its billing and rating procedure in timely compliance with applicable orders of the commissioner, approved rate filings, and approved rule and rating plans; and

   7. (G) Such other service or performance standards including, but not limited to, matters relating to:

      1. (i) Loss experience;
      2. (ii) Safety and loss control success;
      3. (iii) Profitability;
      4. (iv) Underwriting;
      5. (v) Billing and collection of premium;
      6. (vi) Audits;
      7. (vii) Claims;
      8. (viii) Customer service; and
      9. (ix) Such accounting and statistical results reporting as may be specifically required by the commissioner;

5. (5)

   1. (A) Servicing carriers may, within the reasonable discretion of the commissioner, join cooperatively with other licensed casualty insurers or general business corporations for the purpose of satisfying other duties as servicing carriers, including, but not limited to:

      1. (i) Policy issuance;
      2. (ii) Claim review and payment;
      3. (iii) Accounting and auditing; and
      4. (iv) Loss control and safety functions.
   2. (B) Any insurer applying for approval as a servicing carrier, or any currently approved servicing carrier that has contracted or agreed to contract with a third party, shall make full disclosure of such party and provide the plan administrator and commissioner with all such information regarding same as they may request.
   3. (C) All such third-party contractual arrangements and amendments thereof shall be subject to review, examination, and approval or disapproval of the commissioner upon request.
   4. (D) No such contract of a servicing carrier with another entity will in any manner lessen the duties and obligations of the servicing carriers or the standards by which their performance is to be measured;

6. (6) Monitoring and enforcement.

   1. (A) The plan administrator, on behalf of the commissioner, shall monitor and review servicing carrier performance by:

      1. (i) Reviewing the quarterly and annual reports;
      2. (ii) Requiring and reviewing self-audits;
      3. (iii)

(b) (b) However, the commissioner may at his or her own initiative direct the plan administrator to conduct an audit of any servicing carrier whenever circumstances merit such audit; and

1. (iv) Reviewing any other information available that relates to the servicing carrier.

   1. (B) The plan administrator shall require servicing carriers to maintain desired performance levels and will take appropriate remedial action where necessary, including, but not limited to the:

      1. (i) Remuneration adjustment program discussed above; and
      2. (ii) Establishment and administration of a progressive discipline program, which may lead to terminating an insurer's servicing carrier status.
   2. (C) In order to fulfill its responsibilities under this plan, the plan administrator shall have the right, itself or through authorized representatives, at all reasonable times during regular business hours, to audit and inspect the books and records of any servicing carrier with respect to any policies, claims, or related documents coming within the purview of this plan, the Articles of Agreement, or the reinsurance mechanism.
   3. (D) Each servicing carrier shall, further, have the responsibility of reimbursing the commissioner for any reasonable expenses of travel and lodging, including meals, that he or she or any of his or her designees may incur in carrying out their duty of monitoring and enforcement; and

2. (7)

   1. (A) In addition to the adjustments to remuneration of servicing carriers as discussed above and the progressive discipline procedure, servicing carriers are subject to the imposition by the commissioner, after notice and hearing, of administrative fine or penalty in the sum of not more than one thousand dollars ($1,000) for each violation of standard.
   2. (B) Violations of standards of performance shall be reviewed annually by the plan administrator and the commissioner and determined cumulatively under each separate performance standard.

(b)

1. (1) The written Performance Standards and Procedures for Measuring Servicing Carrier Performance hereunder are those currently in effect and are those established by the National Council on Compensation Insurance, Inc.
2. (2) All of which said provisions are expressly incorporated herein and made a part hereof.
3. (3) Such Performance Standards and Procedures for Measuring Servicing Carrier Performance may be amended and supplemented from time to time with the prior, express written approval of the commissioner, provided, however, that no servicing carrier shall be subjected to the administrative fine or penalty provided for in subdivision (a)(7) of this section as to any particular performance standard of which it has not had at least three (3) months’ notice.
4. (4) All servicing carriers shall be deemed to have notice upon the plan administrator’s receipt of approval from the commissioner.