We are simplifying how your business will be classified by adopting the North American Industry Classification System, or NAICS. NAICS is already used by Statistics Canada, the Canada Revenue Agency and is a North American standard. The NAICS structure is used by Statistics Canada and the Canada Revenue Agency to classify employers all across Canada. It will help us simplify and streamline our classifications, to make it easier to understand why your business and other businesses are classified the way they are.
In the rate framework, employers will be assigned to a Predominant Class. This is generally based on the Class that represents the employer’s largest percentage of insurable earnings.
Fair premium rates
The rate framework provides an approach that ensures a fair premium for workplace coverage, and is based on each employer’s individual risk and claims experience.
Premium rate stability
The rate framework takes a prospective rate setting approach. This means that in addition to your annual rates you will be given projected premium rates in advance, which will act as an early indicator of the direction of your premium rates. This will help keep you informed and prepared for any changes to your rates in the future. As well, any rate changes as a result of the new model will be phased over time, to allow you to adjust.
Easy to understand
With a standardized classification system, the rate framework will be very clear, simple and easy to understand, and promotes active and informed participation by all parties.
We will continue our risk sharing arrangement among all employers who collectively pay premiums to maintain the insurance fund. The rate framework is revenue neutral – the overall total amount of premium dollars collected by the WSIB will not change.
Ease of administration
Since the rate framework is very clear in its classification and rate setting approach, this will mean a more efficient and effective system for employers and for the WSIB to administer and maintain.
Our new model uses a two-step approach to setting rates:
The rate framework will use a two-step approach to set and adjust premium rates for businesses.
The first step involves setting an average rate for each industry class based on their risk profile and share of responsibility to maintain the insurance fund.
The second step looks at how your individual claim history compares to the rest of the businesses in your class. This means that your overall rate under the new model will reflect your individual claims experience and risk.
This two-step approach will ensure businesses are paying a fair rate that is reflective of their industry and experience.
When setting premium rates, we will be using insurable earnings, claims costs and the number of allowed claims, over a six-year period. For new businesses with less than one year of experience, your premium rate will be the class average rate.
A business’ predictability is a measure of how much your past claims experience and insurable earnings can be used to predict future outcomes. In our new model, a business’ predictability dictates to what extent your premium rates will be affected by your individual claims experience. A low predictability means a business’ insurable earnings and the number of past claims is quite low, so in this case, your experience would not have a huge effect on your rate. For a bigger business, with a higher number of allowed claims and larger insurable earnings, the opposite would be true.
Under the new model, classes are divided into a number of risk bands. Your business will be assigned to a risk band that best represents your risk in relation to other businesses in your class. Businesses that fall under the same risk band will all pay the same rate. The risk bands are a specific percentage, higher or lower, than the class average rate. For example, let’s apply this to two medium-sized businesses, Terry’s Transport and Wanda’s Warehouse. Both of the businesses are in same class however, Terry’s Transport has more claims over the past six years than Wanda’s Warehouse.
After considering their predictability, claims and insurable earnings history, Terry’s Transport receives a risk profile of 110% and Wanda’s Warehouse’s is 90%. The class rate is considered to be 100%.
If the class rate is $0.47, then Wanda’s Warehouse would be placed in the 90% risk band, meaning their rate would be $0.42. Terry’s Transport would be placed in the 110% risk band, resulting in a rate of $0.52.