1 worksafebc classification and rate setting for local government operations richmond, british...

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WorkSafeBC Classification and Rate Setting

for

Local Government Operations

Richmond, British Columbia

July, 2010

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• WorkSafeBC’s mandate• Overview of the preliminary 2011 rates• Overview of the classification & rate setting system• Historical rates for Local Government Operations• 2011 rate details

Topics

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To work with workers and employers as follows:• To promote the prevention of workplace injury, illness, and

disease

• To rehabilitate those who are injured, and assist with timely return to work

• To provide fair compensation to replace lost wages for injured workers during their recovery

• To ensure sound financial management for a viable workers’ compensation system

WorkSafeBC’s Mandate

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• The average base rate will drop by 1% to $1.54 in 2011 from the 2008, 2009 and 2010 rate of $1.56 per $100 of employers’ assessable payroll.

• 56 percent of employers will experience a base rate increase

• 37 percent of employers will experience a base rate decrease

• 7 percent of employers will have their base rate remain unchanged

• Of the employers witnessing a base rate increase in 2011, 56,500 employers had their base rate increase limited to eight percent in 2010

Overview of 2011 Rates

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• A "payroll shift" reduction in the relative size of high risk industries in 2009 (mainly reductions in the construction and forestry sectors)

• The injury rate had marginal increases from 2004 to 2006, followed by small decreases in 2007 and 2008 and a significant 20% drop in 2009, in part due to the decline in the size of high risk industries.

• The claim cost rate used in the 2011 rates has decreased 3.3% from the claim cost rate used in setting the 2010 rates.

• The change in the financial position from a $610 million surplus in 2008 to a $758 million surplus in 2009 to a projected $637 million at the end of 2010.

• Smoothed investment income returns in 2009 of 5.5% (8.7% on a market basis) is above the actuarial requirements of 3.1%.

The key rate drivers for 2011

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Classification & Rate Setting

The Board has adopted a modified collective liability system, under which self-sufficient groups of employers are created on the basis of similar cost rates. These groups must be large enough to provide for an adequate spread of the risk and stability in the assessment rate.

The costs of compensable injuries and diseases, along with the costs of administering claims and carrying out other statutory requirements, are collected from employers in the form of assessments. For this purpose, employers are classified into classification units, industry groups and rate groups. The costs incurred in relation to these groups determine the assessment rate paid by their members. The Board creates groups that are large enough to provide for an adequate spread of the risk and stability in the assessment rate.

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British Columbia’saggregate economic

undertaking

Assessments paid by

employers

Classification Unit

Rate Group

Sector

Granulation Aggregat

ion

SubsectorIndustry Group

ACCIDENT FUND

Classification and Rate Setting Structures as they apply to British Columbia

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Rate Group Formation

There are approximately 600 Classification Units (CUs) in the system.

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761042 Sports Instruction School

761028 Outdoor Sport Tour

764016 Commercial Laundry

764028 Heavy Equipment Sales, Service, or Repair

764023 Farm Equipment Sales, Service, or Repair

To ensure fair and equitable rates, similar CUs are grouped

together to form industry groups. Industry Groups have enough

credibility to allow WorkSafeBC to track historical cost rate trends.

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761042 Sports Instruction School

761028 Outdoor Sport Tour764016 Commercial Laundry

764028 Heavy Equipment Sales, Service, or Repair

764023 Farm Equipment Sales, Service, or Repair

There are approximately 250 Industry Groups made up of similar CUs. Each IG has a minimum of 200 wage loss claims over the past 5 years

IGs sharing similar cost rates are combined to form Rate Groups.

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Industry Group Movement

If an Industry Group’s historical cost rate varies from its Rate

Group average by more than 20 percent for three

consecutive rate setting cycles, it is moved to a new Rate

Group.

Industry Groups are monitored for changes in their historical

cost rates, and individual firms within Industry Groups are

advised by the WCB if the Industry Group deviates by more

than 20 percent from the Rate Group average.

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Membership Cost rate $1.61

$1.93$1.61$1.29

2007Industry Group

Movement

CH02

$1.96

CH01

$1.58

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Membership Cost Rate $1.53

$1.84$1.53$1.22

2008Industry Group

Movement

CH02

$2.11

CH03

$1.60

CH01

$1.47

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$1.73$1.44$1.15

2009Industry Group

Movement

CH02

$2.10

CH01

$1.37

CH03

$1.49

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$1.73$1.44$1.15

2009

CH02

$2.10

CH01

$1.37

CH03

$1.49

BD01

$2.23

BD04

$2.41


BD03

$2.23

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$1.73$1.44$1.15

2009

CH02

$2.10

CH01

$1.37

CH03

$1.49

BD01

$2.23

BD04

$2.41

BD03

$2.23

CH03

$1.49

CH01

$1.37


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CH02

$2.10

BD01

$2.23

BD04

$2.41

BD03

$2.23

CH03

$1.49

CH01

$1.37

Industry Incentives

An Industry Group working together to implement effective return-to-work and safety programs can reduce their premium base rate.

However, an Industry Group that does not improve safety to reduce costs will see their premium base rate increase.



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Historical Rates

$1.25

$1.50

$1.75

$2.00

$2.25

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011$2.06 $1.79 $1.77 $1.87 $1.63 $1.58 $1.41 $1.36 $1.40 $1.43 $1.46 $1.68

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2011 membership cost rate $1.04

DO01

$1.05

DO01:

753004 Local Government and Related Operations

DO02:

753003 Law Enforcement

Rate Group DO

DO01

$0.91

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Rate group rate up due to higher benefit cost rate and reduced rate group surplus causing 12 cent decrease in amortization credit.

Rate Group DO Costs and Rates

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