14

The ReAR View MiRRoR

www.therearviewmirror.ca

FAll 2011

Between the Lines

gleNN CAlDwell

WSIB or private alternative for O/Os what makes sense for your fleet?
their families? In Ontario, O/Os have the option of opting out of WSIB, and currently the majority of fleets in Ontario allow them to do so. Across the board, the number one reason for opting out seems to be the cost of coverage. So why is WSIB so costly? In his annual report, the Provincial Auditor General Jim McCarter noted that the WSIBs unfunded liability, which is the difference between its assets and what is needed to satisfy the estimated lifetime costs of all claims, has ballooned to over $11.5 billion! WSIBs originally had a 2014 target date for eliminating this liability but this moving target has now been pushed to 2022. The problem for the WSIB and the provincial government is that there are only three ways to address the liability: 1. Raise premiums 2. Reduce benefits 3. Increase investment income. Increasing premiums or reducing benefits has proven difficult, says the Auditor General's report. Many years of experience have shown the inherent political, social and economic sensitivity of implementing changes to either. As for increasing investment income, it is really sensitive to changes in the financial markets. In fact, like many others, in 2008 WSIB lost 15.5 per cent on its investment portfolio. The allocation of WSIB premiums The illustration below breaks down the cost components of every premium dollar received by WSIB. As you can see, as much as 57 per cent of every premium dollar is allocated to past claims, overhead and administrative costs, and legislative obligations, leaving only 43 per cent to pay new claims costs (claims that occur in the current calendar year). Its easy to see why the unfunded liability continues to grow at such a rapid rate. Major issues motor carriers have with WSIB: Premium Cost: Premiums are calculated based on the O/Os gross earnings, yet benefits are calculated based on net earnings. With most O/Os showing a low net, this tends to be a double-edged sword. Gross Profit Pressure: WSIB coverage generally adds about two cents more per mile compared to a comprehensive private coverage. Because margins in the trucking industry are so slim, requiring WSIB may make a fleet uncompetitive, especially if most of their competitors have allowed their O/Os to opt out. On The Job Only: Only covers work related injuries and illnesses. As mentioned, the number of Off the Job injuries compared to On The Job Injuries are estimated to be as high as 3:1*. With the high cost of WSIB, very few O/Os feel they can afford to top things up with private coverage. With rates WSIB rates continuing to rise (another two per cent next year), many of those fleets who have historically mandated WSIB coverage for their Owner/Operators are now rethinking their position and are allowing their O/Os to opt out and purchase private coverage. Process The Opt-Out process is more than just having your O/Os complete the 1149A questionnaire. In addition to having their independent status confirmed by the board, a carrier also needs to ensure that the O/O contract wording reinforces their independence, and applies the contract terms in practice as well as theory. What options do O/Os have when they have opted out? 1. Personal WSIB coverage through the board? 2. Private coverage? 3. Nothing at all? Although # 3 is actually an option, its not recommended that a fleet allow a contracted O/O to haul for them without WSIB or a Comprehensive Private Alternative. O/Os that are injured while driving their truck have the ability to file a claim under the Statutory Accident Benefits (SABS) of the carriers auto policy. SABS claims can be staggering, especially if the injury occurs in the USA. Chances are, if it hasnt already come up, your truck insurance broker will want to know how you are handling these situations before your next renewal. Also, when an O/O opts out of WSIB, it does give them the right to sue. Although mandating a comprehensive alternative does not totally eliminate this risk of a lawsuit, it will drastically reduce their risk and exposure compared to having nothing at all. If you are selecting private coverage, dont just look at the cost and benefits, pay close attention to the terms, limitations and exclusions of the policy. If you are accepting numerous different coverages, be sure to get a copy of the policy for your O/Os file. Not all programs being sold to O/Os are protecting the fleet the way it needs to be. The safest way to ensure coverage has been maintained is to collect the premium through settlement deduction and provide the premium to the insurance company on behalf of your O/Os. If you dont go this route, it is strongly recommended that you collect ongoing certificates of insurance to ensure coverage has been maintained every 60 days. This can be a tedious project, but an important part of the process. Further, the stability of the insurance company needs to be addressed. Coverage provided by insurance companies with less than an A (Excellent) Rating (as defined by the A.M. Best Company www.ambest.com) may put you and your O/Os at risk. So whats it going to be, WSIB or a private comprehensive alternative? Its all about choices. If you are not requiring your O/Os to carry WSIB, be sure to invest some time in the process. Although we all know someone that is licensed to sell insurance, the safest way is to deal with an expert that specializes in WSIB alternative for O/O fleets and be sure to check their references. If you are accepting more than one coverage, ask your specialist to review all policies to determine if there are any gaps, limitations or exclusions that could be leaving you exposed and have them provide their recommendations in writing. Some specialists may also offer access to their legal team to review your O/O contract to ensure they would be deemed independent if the whole process is ever challenged (WSIB Tribunal Hearing). If they cant, it may be time to look for another specialist to ensure your O/Os truly have the right coverage... at the right time. *Source: Injury Facts, 2009 Ed.
Glenn Caldwell is the Vice-President of Sales for NAL Insurance Inc. of London ON. For the last 24 years, Glenn has worked closely with many fleets across the country to ensure their Owner/Operators have the protection they need to keep rollin. You can reach him @ 1-800-265-1657 or gcaldwell@nalinsurance.com

was listening to XMs oldies station the other day and found myself singing out loud to Dr. Johns Right PlaceWrong Time as I cruised down the 401. Its definitely an oldie and some may even say a goodie; in fact, I couldnt seem to get the tune out of my head for the rest of the day: I been in the right place but it must have been the wrong time I'd of said the right thing but I must have used the wrong line I been in the right trip but I must have used the wrong car My head was in a bad place and I'm wondering what it's good for. Like many songs even today, the lyrics are not really that clear. When you think of it, they are kind of confusing. My head was in a bad place and Im wondering what its good for? At this years Fergus truck show, I had a lengthy conversation with an O/O that said the same thing about his insurance coverage. Sadly, this individual fell off a ladder when he was shingling a friends garage, tore his shoulder and severely injured his back. After a one-and-a-half month wait, he finally made it in to the specialist and surgery had been scheduled. At the time, all he had was WSIB as it was a requirement of his contract for the fleet he hauled for. His comment was that it was the wrong coverage for the wrong time. He didnt even think about picking up additional coverage at the time. Thankfully, his fleet allowed him to borrow money from his holdback and even loaned him some extra funds so he could make his lease payment and pay a few bills. Without their support, he may have lost his truck. Hed find a way to work through the debt, but was looking at his options moving forward. WSIB versus WSIB Alternative Coverage seems to be an ongoing debate in our industry. With statistics showing that the ratio of Off the Job injuries to On the Job injuries are as high as 3:1* in some industries, what really is the best coverage for an O/O, their business, and