A new Ontario WSIB proposal will mean higher premiums for some employers
The Ontario Workplace Safety and Insurance Board (WSIB) recently released a proposal called “Pricing Fairness: A Deliverable Framework for Fairly Allocating WSIB Insurance Costs”—and the name says it all. Once this proposal takes effect, Ontario employers will face a new landscape for workplace insurance. While the recommendations are still months away from becoming reality, many of the province’s employers will have to take a closer look at their approach to absence management.
These reforms come to a workplace insurance scheme that’s long been financially precarious. As recently as 2009, the Ontario WSIB had the lowest funded ratio (assets/liabilities) of all provincial workforce insurance plans. And its financial issues have led to Ontario businesses paying much higher premiums.
What to Expect
The proposal calls for a simpler framework that distributes claim costs more fairly. The employer classification scheme, premium rate-setting model and claims experience-rating models will all change. As a result, for some Ontario employers, rates will go up; for others, they’ll decline. “Whatever those outcomes are, they are a reflection of the real costs those employers/sectors are generating,” says the proposal. The changes will likely create more competition because Ontario employers will be bidding for insurance contracts with out-of-province firms whose premium rates have historically been lower.
The new framework would decimate the number of distinct rate groups in the system by more than 80%, bringing them down to 20 or 25 from the current 150-plus. As a result, some industries or business sectors will be lumped in with employers that have poorer performance regarding health, safety and absence management. As well, some employers will no longer be assessed based on multiple insurance premium rates commensurate with their multiple risks. Rather, they will be assessed only according to their predominant business activity, resulting in a higher annual insurance premium.
When it comes to setting risk-adjusted premium rates based on accident experience rates, the framework proposes simply grouping employers by risk and accident costs into low-, average- and high-risk bands. Within each band, individual employers would move up or down from the average premium rate based on their own accident experience. The new experience- rating model will likely resemble Manitoba’s model, in which a firm’s current experience rate is adjusted up or down not from an industry base rate but from last year’s experience rate, based on the firm’s most recent claim cost performance. The net result is a compounding effect on the firm’s experience, whether good or bad.
Who’s Affected?
In the construction sector—which contributes close to $1 billion a year in premiums to the WSIB and represents approximately one-quarter of the total system premium—premium rates will likely decline since the sector’s premium rate contribution toward the WSIB’s unfunded liability has historically been too high. In the manufacturing sector, on the other hand, rates will likely rise because its claim costs have been much higher than average. Sectors such as government and professional services (financial, legal and business services) will see the least impact.
The new premium rates may be phased in, and their full impact might not be felt for several years. But Ontario employers should start preparing—at the very least, by engaging with the WSIB when further consultations on the paper occur so they know the costs they might face. Now is the time to pay attention to changes that will affect employee compensation insurance going forward.
Michael Mitchell is a senior associate, 360 Absence Management, with Aon Hewitt.
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