Which type of fund allows competition with private insurers?

The correct answer is that a competitive state fund allows competition with private insurers. A competitive state fund is established to provide workers' compensation coverage in a way that encourages competition with private insurance companies. This type of fund operates alongside private insurers, allowing employers to choose between different options for workers' compensation coverage.

The goal of a competitive state fund is to offer an alternative that may be more cost-effective or flexible for businesses while maintaining the required protections for employees. By providing competition, it can lead to better rates and services, as both private insurers and the state fund strive to attract and retain clientele.

In contrast, an exclusive state fund typically has a monopoly on the workers' compensation market within that state, limiting competition. Private insurance refers to coverage provided by non-governmental entities without any specific competition framework against a state fund. Self-insurance is when employers take on the financial responsibility of workers' compensation claims rather than purchasing insurance, which also does not involve competing with private insurers in the market.