Experience rating programs are primarily intended to achieve greater insurance equity in premium pricing for construction employers based on their accident and claim cost experience in comparison to the industry rate group average. Experience rating also plays a role in reducing accidents and occupational diseases.
There are two experience rating programs for the construction industry:
- Council Amendment to Draft #7 (CAD-7), and
- Merit Adjusted Premium Program (MAP)
All of the experience rating programs are currently under review.
CAD-7 is the experience rating program for construction employers that have annual premiums over $25,000. CAD-7 compares the employer’s actual number (frequency) of claims over two years, and claim costs over five years, to the expected frequency of the rate group and costs associated with the size of the workforce. The factors included in the calculation are as follows:
- a “rating factor”, ranging from 0.3 to 2.0
- the “average expected accident costs,” which are expressed as a percentage of the average amount of premiums the employer paid over the rating period
- the “employer cost index”, using the employer’s actual accident costs for the two-year period being considered, compared to what the WSIB expects those costs to be, based on the employer’s premiums and taking into consideration any cost relief the employer has requested that has been approved; the cost index ranges from 1.00 (the best) to -4.00 (the worst)
- the “employer frequency index”, comparing the actual number of lost-time injuries the employer has to the expected number of injuries over a two-year period, with an index ranging from 1.0 (the best) to -4.0 (the worst); be aware that a new claim under CAD-7 does not count as a frequency until there is full or partial loss of earnings (LOE) for eight days (the WSIB is responsible for the costs of a claim from the date of accident), or if non-economic loss (NEL) benefits are paid and LOE benefits are not paid, and
- the “employer performance index”, which is a weighted average of the employer’s cost index and frequency index, at two thirds and one third respectively.
If the actual frequency (lost-time claims) and costs are lower than expected, the employer may receive a refund. If the actual frequency (lost-time claims) and costs are higher than expected, the employer will receive a surcharge.
All experience rating programs automatically exclude the costs of claims arising from the following long-latency diseases from its calculations: Acquired Immune Deficiency Syndrome (AIDS), carcinoma, chest diseases due to aluminum and cadmium exposure, chronic noise exposure, chronic obstructive lung disease, pneumoconiosis due to asbestos, silica, talc, hard metal (cobalt) and other mineral dust, and Scleroderma. The rate group shares the costs of these claims.
In the year a traumatic fatality occurs, a premium increase equivalent to the CAD-7 refund an employer is entitled to receive is applied to the employer of the deceased worker – in effect eliminating the CAD-7 rebate for that year.
MAP is the merit incentive program for all employers, including construction employers, with annual premiums between $1,000 and $25,000 excluding any adjustment by any of the WSIB’s experience rating programs. Once you qualify for MAP you will remain in MAP for at least 3 years, despite premium fluctuations below $1,000 and over $25,000.
MAP reviews the number of claims with more than $500 in costs over a three-year period. Claims over $500 are included in your accident record, while claims under $500 are not included. Employers who have no claims with costs over $500 during the period in review will receive a 5-10% discount off their premiums. Employers who have one or more claims with costs over $500 during the period in review will receive a premium increase of up to 50%. Any claim costing over $5,000 will result in an automatic 10% surcharge on the employer’s premium rate, plus any other MAP adjustment.
A fatality claim will automatically result in a 25% surcharge on the employer’s premium rate, plus any other MAP adjustment.
A MAP adjustment for a claim involving a third party is determined by pro-rating the claim costs and any special adjustments according to the percentage of liability of the parties involved.