WorkSafeBC releases 2014 preliminary rates

The 2014 average base premium rate for British Columbia employers is projected to be higher by less than one-tenth of one per cent of the average employer’s total payroll costs, according to WorkSafeBC. This follows a similar increase for 2013, after nearly a decade of level or declining rates.

The average rate per $100 of employers’ assessable payroll is projected to increase from $1.63 to $1.70, a 4.8 per cent rise in nominal terms.

To put this increase in perspective, a small business employer with a payroll of $500,000, and an average premium rate, would see a rate increase of $400 for the year, or $33 per month, said WorkSafeBC.

Required rate increases for 2014 have been reduced by a contribution of $319 million from reserves and deferrals in order to cap the required increase. These measures included a $278 million withdrawal from the capital adequacy reserve (reducing average rate by $0.15), and a $41 million deferral achieved by capping maximum rate increases for industries at 10 per cent, versus the normal 20 per cent limit (reducing average rate by an additional $0.05), said WorkSafeBC.

The rate increase is due to two main factors:

• increased claim costs — the cost rate has grown to $1.77 as compared to $1.66 in the previous year
• softened investment returns.

Increased claims costs in 2012 were primarily in the areas of increased volumes of long-term disability awards and increased overall costs in the health-care area. WorkSafeBC is working with employer groups in impacted industries to reduce the incidence of serious injuries and enhance return-to-work opportunities, in order to attempt to arrest these trends.

Lower investment returns in recent years are reducing the capacity to use surplus investment earnings to dampen the rise in premium rates below the overall cost rate, according to WorkSafeBC. Under board policy, surplus investment returns are shared with employers through a five-year smoothing mechanism. The average investment return over the most recent five-year period has been impacted by the weak and often volatile financial markets that have existed across many jurisdictions since 2008. The large surplus previously available to help to mitigate upward pressure on premium rates has been significantly eroded over the past few years.

Employers are assigned to one of 551 classification units with other similar businesses. These classification units are then pooled into one of 62 insurance pools referred to as "rate groups." Employers in each rate group pay the costs of injuries and diseases that occur to the workers of employers within the group, with the intent that each rate group be self-sufficient with regard to compensation costs. This limits cross-subsidization between industries, maintains relatively stable base premium rates, and limits growth of unfunded liabilities in the insurance pools.

Each year, costs in some rate groups go up, some go down and others stay the same. This year, 77 per cent of employers will experience an increase to their industry base premium rate, 18 per cent will experience a decrease, and five per cent will see little or no change, according to WorkSafeBC.

WorkSafeBC will be consulting with stakeholders on the expected rates over the course of the next two months, and a final decision on premium rates for 2014 will be made by the WorkSafeBC board of directors in October.