HomeMy WebLinkAboutFIN-10-002 - WSIB Excess Insurance Coverage CancellationREPORT
REPORT TO:
Councillor B. Vrbanovic, Chair, and Members of the Finance
and Corporate Services Committee
DATE OF MEETING:
January 11, 2010
SUBMITTED BY:
Dan Chapman, General Manager of Financial Services and
City Treasurerg
PREPARED BY:
Roger LeBrun, Manager of Financial Planning
Angela Kotlarchuk, WSIB Administrator
Brenda Johnson, Manager of Accounting
WARD(S) INVOLVED:
N/A
DATE OF REPORT:
December 15, 2009
REPORT NO.:
FIN-10-002
SUBJECT:
WSIB EXCESS INSURANCE COVERAGE CANCELLATION
RECOMMENDATION:
For information only.
BACKGROUND:
Prior to 1997, the City of Kitchener used to pay premiums for WSIB coverage as a Schedule 1
employer. In 1995, changes were being proposed to that program which could have potentially
seen significant cost increases based on claims history. As a result, the City of Kitchener
transferred from Schedule 1 to Schedule 2, as recommended by a consultant, which allowed the
City to pay for actual claims costs and this transition occurred in June 1997.
Due to the fact that the City had limited experience in this area with respects to claims
history, it was also recommended that additional coverage be purchased for large
claims. This Excess Insurance was purchased from Marsh Canada which would cover
any claims in excess of $250,000. In 2003 the City renewed the insurance with a
$350,000 deductible to control the premium costs which were climbing rapidly.
Originally, the premium for this coverage was considered to be a reasonably affordable
option; however, the premiums have continued to escalate to a point where it is not
longer considered to be an affordable alternative
and Corporate Management Team has
directed that the Excess Insurance coverage be allowed to lapse as of January 1, 2010.
REPORT:
Excess Insurance was originally purchased in order to ensure that the City was well covered in
the event of any large or catastrophic claims which are considered to be claims in excess of $2
million. The premium for that coverage was approximately $50,000 in 1997, however the
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premiums have escalated significantly and are $224,000 for 2009. In addition, our insurance
provider, Parapet, is no longer offering that coverage effective 2010. The only other provider in
Canada who offers this coverage has provided a quote of approximately $186,000 however they
have also increased the deductible from $350,000 to $500,000.
Presumptive Legislation for Firefighters
One of the key considerations that gave rise for the review was a result of the new presumptive
legislation that the Province enacted in 2007 for Firefighters. Presumptive legislation identifies
specific diseases or injuries that would be presumed to be work-related for the purpose of
workers' compensation. In the case of heart injuries and the eight types of cancer specified, the
WSIB will now presume the disease or heart injury to be work-related unless it could be
demonstrated that it was caused by other factors, such as non-work-related exposure or
hereditary factors. These changes apply to heart injuries sustained or diseases diagnosed on
or after January 1, 1960. Claims already decided on by the WSIB or the Workplace Safety and
Insurance Appeals Tribunal can be re-opened at the request of the claimant.
At this point, the City of Kitchener has experienced six claims under this new legislation and the
financial impacts of all claims were managed well below the deductible threshold of Excess
Insurance.
The City’s actuarial consultants have provided statistical information on this issue and have
determined that the likelihood of a catastrophic claim happening is not probable, but is possible
and that one in 450 municipalities will have a catastrophic claim in 5 years. Most of the large
claims that they have experienced involve police officers and most cases are where death does
not occur but rather a critical injury, requiring very high health care costs.
Financial Health of the WSIB Reserve
Another key factor that has given rise to the evaluation of the purchase of the Excess Insurance
is the overall financial status of the WSIB reserve. The reserve is projected to end fiscal 2009
with an accumulated deficit of almost $529,000 which is approximately $500,000 unfavourable
relative to budget. This is largely due to escalating billing claims in excess of budget. While the
overall cost of claims has increased substantially, the primary cause is due to the fact that the
cost per claim has increased and not necessarily the overall number of claims.
The annual savings of $224,000 would remain in the WSIB reserve and without any other
changes to the contributions in to the reserve fund, it is anticipated to return to a positive
position by 2015.
The appropriate level of funding in the reserve will be determined in consultation with the City's
actuaries and external auditors as part of the comprehensive review of reserves in 2010.
FINANCIAL IMPLICATIONS:
Effective January 1, 2010, the City of Kitchener will no longer be purchasing Excess Insurance
and the savings of approximately $224,000 per year will accrue to the WSIB reserve fund.
COMMUNICATIONS:
N/A
ACKNOWLEDGED BY: Dan Chapman (General Manager of Financial Services and City
Treasurer)
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