Excerpt from NCCI Circular FYI-PLAN-MS-2007-02, 04/12/07:The residual market (market of last resort) is intended to provide insurance for employers that are statutorily required to obtain workers compensation and employers liability coverage but are unable to secure coverage in the voluntary market. As part of NCCI’s strategic vision of maintaining and depopulating the residual market, NCCI’s VCAP® Service redirects coverage opportunities for employers to voluntary market insurers, which generally provide coverage at a lower cost.Employers and producers often have limited access to voluntary coverage providers that may be willing to write voluntary workers compensation coverage. VCAP® Service provides an additional source for producers and employers to secure voluntary workers compensation coverage prior to entering the residual market for coverage.VCAP® Service applies to all employers seeking coverage through the residual market in which NCCI is the Plan Administrator; it is offered through NCCI’s residual market application processing system (RMAPS® Service). Through this free, Internet-based application, voluntary coverage providers will have the opportunity to evaluate potential employers that submit applications through the residual market.To participate in NCCI’s VCAP® Service, voluntary coverage providers must meet the following eligibility requirements:1. Participate in the Mississippi Plan as a Mississippi Workers’ Compensation Assigned Risk Pool participant or as a residual market assigned carrier2. Be licensed to write workers compensation and employers liability insurance in the state3. Have a minimum of a B+ financial rating as published by A.M. Best4. Agree to VCAP® Service contractual arrangements and/or procedures established by the Plan AdministratorAll applications (electronic, phone-in, or mail-in) submitted to NCCI as Plan Administrator are reviewed to determine if they match the preselected criteria specified by a participating voluntary coverage provider. Producers and employers submitting applications will receive a real-time electronic notification if a voluntary coverage provider is interested in providing coverage.Participating voluntary coverage providers establish underwriting criteria in NCCI’s VCAP® Service. Then, VCAP® Service notifies the voluntary coverage providers when an applicant matches the providers’ preselected criteria for coverage. Voluntary coverage providers are then given the option to either extend or decline an offer of voluntary coverage upon further underwriting review. NCCI provides copies of the ACORD® 130 application, reported applicant history, and the residual market premium calculation to help the voluntary coverage provider decide whether to offer coverage.Any application being considered for voluntary coverage is temporarily suspended from further assigned risk processing. This includes manual processing, research, and/or assignment to a Mississippi Workers' Compensation Assigned Risk Plan (WCIP/Plan) assigned carrier. There is no impact to the employer’s established effective date during this time.The producer and voluntary coverage provider work together to negotiate a “reasonable offer of voluntary coverage.” Producers and employers are required to accept any “reasonable offer of voluntary coverage” or the employer becomes ineligible for coverage in the WCIP. The first voluntary coverage provider to receive acceptance of an offer from the producer will confirm coverage and issue the policy. Once accepted, the effective date is determined based on the date the policy would have been effective in the residual market in accordance with NCCI’s Basic Manual for Workers Compensation and Employers Liability Insurance Rule 4-A-3-d.Producers cannot be notified of a specific voluntary coverage provider’s interest until the time of application. However, NCCI will advise the producer upon application submission that there may be a match and provide further explanation of the VCAP® Service.Producers are not required to be under contract or licensed with the voluntary coverage provider, but they can use the first policy period to develop a business relationship. Agreements between the producer and the voluntary coverage provider are exclusively between the two parties, do not include NCCI, and are not part of the filed and approved WCIP Rules. Upon renewal, the voluntary coverage provider may renew or nonrenew the policy. If nonrenewed, the risk can submit a new application with the same or alternative producer to reapply for coverage through the Mississippi Plan.Employers that are not offered coverage in the voluntary market will continue through the residual market via NCCI’s RMAPS® Service.Since the national establishment of VCAP® Service effective July 1, 2006 in NCCI Plan Administered states, it has placed 1,649 employers in the voluntary market, with a corresponding $12 million in premium diverted from the residual market to the voluntary market on a national basis. Currently the depopulation rate is 7.9%.NCCI’s VCAP® Service offers a number of benefits to users and the workers compensation system, including without limitation:• Slowing the repopulation of the residual market and potentially reducing operating losses for the industry• Providing producers and employers with expanded access to voluntary market insurance• Expanding voluntary coverage providers’ base of potential insureds that meet their specified underwriting criteria• Delivering real-time electronic notification of potential applicants to the producers and to participating voluntary coverage providers with matching criteriaThe VCAP® Service program has been published as Rule 4-D in NCCI’s Basic Manual for Workers Compensation and Employers Liability Insurance.