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Comp rates hold steady in Canada

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Employers in most Canadian jurisdictions will pay steady or lower premiums for workers compensation insurance in 2007, but concern persists about a major deficit in Ontario's workers comp program.

With the exception of the sparsely populated Yukon Territory, Canadian employers in all other jurisdictions are paying flat to substantially lower premiums.

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.

In Ontario, employers will pay an average premium of $2.26 Canadian ($1.93) per $100 Canadian ($85.22) of insurable earnings in 2007, unchanged from the average premium rate in 2006. Last year's rate, though, rose for the first time in three years as Ontario's Workplace Safety & Insurance Board attempted to control the system's ballooning deficit.

Although the Ontario system's unfunded liability stands at $6.5 billion Canadian ($5.54 billion) vs. the $7.1 billion Canadian ($6.09 billion) cited by WSIB officials when proposing the 2006 increase, WSIB Chair Steve Mahoney said the organization has introduced several measures that are helping alleviate some of the financial pressures on the system, including a campaign to further reduce injury rates in the province.

Despite the steady premiums for 2007, at least one employers' group remains concerned that the enormous deficit will eventually force the WSIB to raise employer premiums at double-digit rates. "The pessimist in me says we could be heading for trouble," said Sherri Helmka, executive director of the Kitchener, Ontario-based Employers' Advocacy Council, which represents more than 600 employers in the province.

The Canadian Federation of Independent Business, which represents more than 100,000 small to midsize employers across Canada, argued against an increase in the average premium rate for 2006, offering alternatives such as creating cost efficiencies at the corporate and administrative level at the WSIB, correcting an amendment to workers comp legislation that has resulted in unintended cost increases in Ontario and aligning WSIB staff salaries with similar occupations in the private sector. The organization also suggested that, if necessary, WSIB extend its timeframe--now 2014--for trying to eliminate the deficit, which WSIB has not done, according to a WSIB spokeswoman.

WSIB's decision to hold rates at the current level is "entirely appropriate" and it needs to consider alternatives to increasing employer premiums, said Judith Andrew, vp, Ontario for the CFIB in Toronto. "They had better not be thinking about a rate increase," she said. "They haven't done very much in the area of cost control."

Quebec, meanwhile, lowered its average employer premium to $2.24 Canadian ($1.91)--a decrease of about 3% from the average 2006 rate--because good investment yields have improved the program's funded position. While the organization's last annual report estimated the financial needs of the system at $2.3 billion Canadian ($1.96 billion), board officials said they expect the fund to be fully capitalized by early 2007.

If the program becomes 100% funded, that would reduce the pressure on the board to increase premiums for the next few years as it did in 2006 to manage the deficit, said Richard Fahey, vp, Quebec, for the CFIB. "Obviously, it's always a plus because employers in Quebec always think they pay too much and the system is too generous," he said.

Alberta employers again will pay the lowest premiums for workers comp coverage in Canada as the average employer premium declined for the third straight year. More than 90% of Alberta employers will pay lower premiums in 2007 amid decreasing injury rates and lower duration of injuries, aided by positive investment returns.

"More and more employers are investing in workplace health and safety programs and it's paying off, not only in reduced injuries and illness, but in the premium rate employers pay," Guy Kerr, president and CEO of the Workers' Compensation Board-Alberta, said in a statement. "The decrease in the average rate for 2007 is a strong indicator of just how successful disability management programs can be."

Average premiums for employers in British Columbia declined 10.8% for 2007 as the province also had success in stabilizing injury rates and lowering the duration of injuries, but very strong investment returns were the key contributor to the 2007 rate declines. About 68% of employers in British Columbia employers will see lower rates, while 10% will see flat rates and 22% will experience rate increases.

Employers in the Yukon Territory now pay one of the highest premiums in Canada as the territory continues to reduce its subsidy program. The subsidies began in 1999 when the workers comp program featured a substantial surplus, but rising claims costs and lower investment income forced the board to phase out the subsidies in an effort to achieve a fully funded position for the program. The average employer premium has risen from $1.74 Canadian ($1.49) in 2005 to $2.64 Canadian ($2.25) in 2007. Prior to these increases, the Yukon had the lowest employer premiums in Canada.