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Employers in the two largest Canadian provinces-Ontario and Quebec-will pay more for their workers compensation insurance in 2006 as both provinces grapple with large workers comp deficits.
Employers in most other provinces, though, will see lower premiums as they continue to improve workplace safety and lower claims costs.
Canadian workers comp coverage is provided largely by provincial and territorial workers comp boards and financed by employer-paid premiums. Employers have no control over the rates set by the boards; rates for each company in a given sector reflect the loss experience of that sector, though those companies that have low incident levels within a sector are eligible for individual rebates.
Ontario and Quebec both raised employer premiums for workers comp insurance for 2006 because of deficits in their programs.
Ontario's Workplace Safety & Insurance Board raised the average premium rate for employers by 3%, to $2.26 Canadian ($1.94) per every $100 Canadian ($85.79) of insurable earnings. The board said the increase was needed because of the program's substantial unfunded liability-the difference between the total cost of the claims in the system and the funds in the system to pay for them.
The province's unfunded liability stands at $7.1 billion Canadian ($6.09 billion), and the board is trying to eliminate the deficit by 2014, said Jill Hutcheon, president of the Ontario WSIB. "We cannot allow this debt load to be passed on to future generations of employers," Ms. Hutcheon said in a statement.
Ontario employers were disappointed by the WSIB's decision to raise premiums.
"We did not believe the board made a good business case foraverage rates to go up," said Sherri Helmka, executive directorof the Kitchener, Ontario-based Employers' Advocacy Council, which represents more than 600 employers in the province.
Instead, the board could have extended the projected unfunded liability period by two years, Ms. Helmka said, noting that injury rates continue to fall in the province.
Employers are concerned that rising workers comp premiums, combined with other economic issues, will mean the loss of jobs, Ms. Helmka said. Employers "definitely have said it's a hardship," she said.
The situation will worsen for employers in the province as they have already been advised that premium rates will continue to rise in the next three to five years, she said. "And we find that totally unacceptable."
Ontario employers are discussing the possibility of seeking private insurance for workers comp risks, Ms. Helmka said. But participation in provincial workers comp programs is mandatory for industries that have a high potential for workplace injuries, such as manufacturing. Furthermore, while the provincial and territorial workers comp programs in Canada are no-fault arrangements that preclude workers from suing employers for negligence, that protection is not extended to employers covered by private insurance.
Quebec, meanwhile, raised the average employer premium rate by 2%, to $2.32 Canadian ($1.99), in an attempt to control its deficit, which stood at $1.7 billion Canadian ($1.46 billion) at Dec. 31, 2004.
Employer premiums in the province have risen from a five-year low of $1.85 Canadian ($1.17) in 2002. "The increase of the average rate is attributable to the bad yields of the financial markets in 2001 and in 2002," the board said in a statement.
Employer premiums for workers comp insurance in the other provinces, though, were all lower, with the exception of Nova Scotia, which froze premiums at 2005 levels (see chart, page 21).
Alberta, for example, has the lowest premiums for workers comp coverage in Canada, after premiums fell more than 20% over the past two years as the province's success in lowering claims costs has enabled it to eliminate its deficit. The program now has an operating surplus of $252.4 million Canadian ($216.5 million), according to the latest publicly available figures.
Several employers in the province have taken action to cut claims costs (see related story).
Premiums in British Columbia fell due to a 6% drop in short-term disability costs and a 2% decline in administrative costs, said Sid Fattedad, chief financial officer for WorkSafeBC, the workers compensation board of British Columbia. The average claim duration declined 14%, to 34.4 days, in the province last year. "We have improved our claims costs by improving the duration of claims," he said.
Mr. Fattedad attributed the positive results to "good old-fashioned claims management," noting that the board has a sophisticated data warehouse that allows it to aggressively monitor the claims experience of specific employers and their industry sectors. He cited the health care and construction industries as examples of sectors that have done well in their efforts to manage their claims and injury rates. "What we're seeing is some industries are doing really well," he said.
The province has eliminated the unfunded liability that existed as recently as 2003 and now has an operating surplus of $280 million Canadian ($240.2 million), which is good news for British Columbia employers. "We continue to see premium rates lowering and continue to expect our funding position to be strong, at or above current funding levels," Mr. Fattedad said.