July 14, 2008

Point-Counterpoint

Experience rating showcases ‘policy-design partnership’

PETER KENTER

correspondent

Les Liversidge, LL.B., is a barrister and solicitor from Markham. She runs a practice that specializes in representing clients in all aspects of workplace safety and insurance in Ontario.

“Experience rating isn’t something that the WSIB dreamed up one day,” says Liversidge. “It is a long-standing program that has actuarial integrity and is probably the quintessential example of policy-design partnership between Ontario businesses and the WSIB. The underlying economic theory under-pinning experience rating is straightforward — higher costs internalized by employers for injuries should translate into workplace safety expenditures to the point where the cost of reducing injuries equals the expected benefits.”

While Liversidge says he agrees that improving the experience rating system in Ontario on an ongoing basis makes perfect sense, he cautions that recent comments such as those from Ontario NDP leader Howard Hampton, calling for the provincial government to “direct the Workplace Safety & Insurance Board to eliminate the flawed experience rating program,” make no sense.

“One allegation against experience rating is that it motivates employers to essentially hide claims or give workers a phony denigrating job to save money,” says Liversidge. “That allegation is patently false. I don’t accept the premise that Ontario employers would behave in such a fashion as to attempt to escape their obligations. But even if you accepted that premise that they would act in this fashion out of self-interest, the math doesn’t bear it out. They would spend more money than they would save by side-stepping the experience rating system and open themselves to heavy fines and penalties at the same time.”

Liversidge agrees that the construction industry has special circumstances in that individual contractors typically have a large turnover in workers who may not have benefited from their specific safety program.

“But that’s true of other industries, such as tourism, as well,” he says. The creation of the CAD-7 experience rating program which addresses the construction sector specifically is proof that the experience rating system is flexible enough to address specific sectoral concerns, he says.

“CAD-7 has an injury frequency component that is different from the NEER [New Experimental Experience Rating] program that applies to everyone else. Just because the challenge of construction is a more difficult one, doesn’t mean that we shouldn’t look for a way to achieve financial motivation through insurance variables to reduce injuries.”

On whether rebates for exemplary safety records should be returned in cash, or applied to the next year’s insurance, Liversidge argues for the retrospective system. “I think that getting an actual cheque makes more sense as it’s a stronger motivator for action,” he says. “What would management find more appealing — being told the company is getting a rebate cheque, or being told that their next year’s premium might not increase? The closer they tie the results to action by, and expectations from, middle management, the more vibrant the program becomes.”

Liversidge points to a 2005 study by the Institute for Work and Health, which concluded that the province’s experience rating program “functions well, encourages prevention and contributes to positive workplace health and safety practices. The large majority of employees state that they are being encouraged to report accidents and incidents and are being offered suitable modified and early return to work if injured.”

“I think that should be the end of the debate,” says Liversidge.

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