The Eye of the Beholder: Are Canada's Workers' Comp Boards Overfunded?
A report issued this month claims that, as of last year, eight out of 12 Canadian workers' compensation boards are overfunded by a total of $6.8 billion. In Canada, all boards are monopolistic, completely managing the workers' compensation process for their provinces, from underwriting to claims administration. The group issuing the report, the Canadian Federation of Independent Business (CFIB), says that this financial overreach by the boards is “depriving employers of billions of dollars that could otherwise be used to invest in their businesses, create jobs and improve wages and worker safety.”
Or are they?
According to the CFIB, these boards should maintain a funding ratio of between 100 per cent and 110 per cent, based on a measurement of the ratio between a board's total assets and liabilities. Using this criterion, a board in excess of 110 per cent is over-funded. The CFIB maintains that a 10 per cent cushion is adequate to meet the needs of the insuring agency for any liabilities that may arise.
The Canadian Federation of Independent Business (CFIB) concluded in its 2011 Small Business Workers' Compensation Index that the ratio between a board's total assets and total liabilities (funding ratio) should fall within the range of 100% to 110%.
So, if I read that correctly, the proper funding ratio for Canadian workers' compensation insurers has been determined by the Canadian Federation of Independent Business, which has just issued a stern report stating that most of the provinces are not compliant with the standard they created.
Now isn't that special. That little tidbit never made it into the source article describing the otherwise irresponsible behavior (excuse me, this is Canada) behaviour of the WCB's.
On an unrelated note, I completed a study last year that found I was the smartest person in the world, and research I just completed found that all of you who think I am a dumbass are wrong, based, of course, on the earlier rock solid analysis establishing my eminent intelligence.
I am told by Canadian sources that several workers' compensation boards have asked the CFIB for their data and research that lead to the 110% number. As far as it is known, all requests have been ignored. Perhaps they have an even earlier study that determined they are never wrong, so they did not see the utility in honoring these requests.
According to the report, two provinces, Nova Scotia and Ontario are underfunded. Quebec and the Northwest Territories are adequately funded, and the remaining jurisdictions are as bloated as a beached whale in the hot summer sun. At the low end of the scale is New Brunswick at 112.1%, followed by Newfoundland with 126.1%. Then there is Saskatchewan and Alberta at 133.1% and 133.8% respectively, and British Columbia at 141.7%. The final three rounding out the list are Manitoba at 145.9%, Yukon Territory at 149.8% and Prince Edward Island with a whopping CFIB condemning 159.4%.
Of course, to be fair, Prince Edward Island has like 3 people living there, and their entire reserve is probably $78 (Canadian). We should cut them some slack.
Honestly, I could not tell you what formula should be used to determine adequate reserves for Canadian Provincial Boards. However, I seriously question the accuracy of a group that has essentially self-declared a standard, and then treats violations of that standard as an egregious act. As a business trade group, they clearly have an interest to represent – and assuring more money flows back to their members is a legitimate interest. However, it doesn't mean that their word should be taken as gospel; by the press or any other interested parties.
And if they really want their findings to be taken seriously, then they should pony up the data that lead to them.
Not all is lost, however. We've learned with this story that the legitimacy of the standard is unimportant. What matters is that organizations for which you established standards have failed to live up to them. That's when you've got a real story, eh?
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Robert Wilson is President & CEO of WorkersCompensation.com, and "From Bob's Cluttered Desk" comes his (often incoherent) thoughts, ramblings, observations and rants - often on workers' comp or employment issues, but occasionally not.
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