Careful

WORxSnFETnnvnlL SECURITAIRE

Attention

NB

WorkSafeNB - T¡m Petersen

PRESENTATIO N TO STAKEHOLDE RS

JUNE 20,2OT7

AGENDA

F workers' compensation system & principles

r 20L6 Annual Results

r Conrad Ferguson - claim costs/z}L8 assessment rate

r Next steps

27tINBI

Crnlul

Wo R K S A F E

l ti/\V/\l ,,t ¡ r rt¡l/\ltl

SYSTEM & PRINCIPLES

r Shared Vision - Healthy and Safe Workplaces in NB

F Complex system founded on 5 Mered¡th Principles (1918)

r No-fault compensation; Collective Liability

r Security of benefits; lndependence; Exclusive jurisdiction

/ Balance and compromise are fundamental to the system

r Neither workers nor employers can get L00%

r Supported by a stakeholder Board with sound discipline

3rnNBI

Carefut

TRAVAIL sÉcURITAIRE

Wo R K S A F E

Attention

r

r

r

2416 ANNUAL RESULTS

Deficit of srr5 million

Funded level of Stlz million - 1L2% (2015 - Lzg,z%l

lnvestment returns - g.L 6% (Target - 6 ,ag%l

Administration - S+S JM (Budget - 95l.ZM)

7 claim costs - SgllM (20L5 - $292M Budger - glggM)

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4rl1lNBI

WO R K S A T €

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WORxSNFETnnvnIL SEcURITAIRE

Attention

NB

Morneau Shepell - Conrad Ferguson

PRESENTATIO N TO STAKEHOLDERS

JUNE 20,2OL7

QUESTIONS ANSWERED?

o What are the key drivers to the change in funding levels overtime?

o what has and has not changed in last 5 years?o ls aging of population an important factor?o What is the level and t¡ming of claims cost increases?

' what are the sources of claims cost increases?o What are the key components of the 20 L7 rate increase?o What are the key drivers to cost increases in the last 5 years?o What does this mean fo r Z0lg rates?o Final observations

6rnNBI

C¡rclulAtt.ntlon

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What are the l<ey drivers to the change in fund¡ng levels over time?

Attention

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WHATARE THE KEY DRIVERS OF CHANGES IN FUNDING LEVELS OVER TIME?FUNDING LEVELS 1990 TO 2016

I Funding Level at year end Current Funding Policy Targets-tso%

140%

L30%

I

"ìI

L20% r

LLO% ]

i

LOO% i

1

i

90% i

*-.

80% i :

70%

60%

so% I

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rnNBI

WHAT ARE THE KEY DRIVERS OF CHANGES IN FUNDING LEVELS OVER TIME?CLAIMS EXPERIENCE ANALYSIS - ASSESSED EMPLOYERS ONLY

Lost Time Claims - By Nature of lnjury*l* Sprain, strain and pain '"ô. Bruises, Contusions -=+severe and External

6000

5000 I

400fi

300Ð

2006

1000

0

Reduction from legislativechanges, a large part of it dueto Standard of Evidence and

3 day waiting period/

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õro&r.tþQõ""QÕrrõrrJ'g'%'"."'%ùor\øooùo"ùouþoi4'"øùr"'%%%'%

rnNB¡

9

Reduction of about 750Severe and External and

Bruises, Contusions

..t r "+ ".

Careful

TRAVATL sEcuRlTAtRE

WoRKSAFE

Attention

WHATARE THE KEY DRIVERS OF CHANGES IN FUNDING LEVELS OVER TIME?DRIVERS OF FUNDING LEVEL INCREASE

December 3L,2008 to December gt, zoL4 (S Millions)

' Funding level went from gg% to 13gyo, â difference of $ s44 M. Where d¡d S 544 M come from?

Surcharges toEmployers, S48_..

Adm Exp belowbudget, S27

Other Factors, S19

Investment lncomeexceeding liability

requirements, 5270

Lower Cost of NewAccidents, $67

Lower Prior YearClaims Costs, 5113

I crnlutl

rnNBI

Itt.ntlon

WO R K S A F E

I t/\v/\il .,t r l [il t/\[{l10

WHAT ARE THE KEY DRIVERS OF CHANGES IN FUNDING LEVELS OVER TIME?DRIVERS OF FUNDING LEVEL DECREASE

December 3L,20L4 to December 3L, ZÛLO (S Millions)

' Funding level went from L38% to Lt2%, a difference of ($241 M)

' Excess investment income amounted to +$ gg M, spending below administration budgetamounted to+$4 M and otherfactorsamounted toabout + S 5 M, which meansfunding level reduced bv ($ 2Bg M) in total over the period

. Where did ($ Zeg M) come from?

Refunds toEmployers, 575

Higher Cost of NewAccidents, 551

Higher Prior YearClaims Costs, 5163

rnNBI

Careful

TRAVAII SEcURITAIRE

Wo R K 5 A F Ê

Anenüon

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WHAT HAS AND HAS NOT CHANGED?

What HAS NOT chansed?No major transformation in economy

Essentially similar group of employers

I Not realistic to think prevention and RTW practices in workplaces have changed so dramaticallyin such a short period (same could have been said following L993 changes)

Essentially similar profile of workers

I Averege age of working population increasing by about 0.1year each year based on StatisticCanada data

Staff at WSNB essentially the same

lnvestment income generated gains of $309 M since 2008

Administration expenses account for a rate increase of $0.04 since zOtO (note averagemonth end open caseload for 2016 was about 40% higher than corresponding numberfor 20141

I Administration expenses excluding OHS comparable to other WCB's of similar size in Canada

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rnNBI

Carefut

Wo R K S A F E

TRAVATt sÊcURtrAtRE

Attention

L3

WHAT HAS AND HAS NOT CHANGED?

What HAS chaneed?' Definition of compensable injury or disease expanded to presumption in favour

of worker from a preponderance of evidence basis (pre-1993 definition)' Conditions affecting continuation of a lost time claim, benefit level and

closure for reasons other than age and duration limits now subject topresu m ptive-like standard of evidence

' supplements list has been narrowed significantly

' Criteria for receiving LTD benefits has expanded and does not allow forEstimated Capable Earnings as often as pre-1993 situation

' CPPD offset has been reduced and LO% annuity contributions required onamount of CPPD offset

' Various other medical and support expenses provided on expanded basis

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WO R K S A I E

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IS AGING OF POPULATION AND IMPORTANT FACTOR?GENERAL POPULATION HEALTH AND AGING

Source: New Brunswick Health Council-Health System Sustainability in New Brunswick

July 2015

Source: Statistics Canada

Chronic conditionsThe rnore chronic conclitions we have ancl the earlier in life theyappear, the greater they wiilexerl demancl on healtlr servir e.s.

Percentage of the population with one or morechronic health conditions by age group

'rtr 64

lh'r,

15 54

37o/o

1.8- 34

54"h

NB Population - Ages 2O to 64

300,000a20-34 tr35-49 r50-64

250,000

200,000

L50,000

1.00,000

50,000

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IS AGING OF POPULATION AND IMPORTANT FACTOR?

Pre-existing chronic conditions are prevalent in N B population atall working ages

o Prevalence increases rapidly with advancing ages, as expected

o Worker population has aged significantly in last 25 years

ln context of the current standard of evidence:

ßisfrs ol Íncreased clqims volume and costs is definitelya

increased by combination oÍ aging and generalpopulqtion heolth

a

Careful

TRAVAII- SEcURITAIRE

WO R K S A F É

Attontlon

t7rnNBI

IS AGING OF POPULATION AND IMPORTANT FACTOR?PROPORTION OF LOST TIME CASE LOAD AGED 45 AND OVER

70% ,i-

60%

55%

50%

I

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65% r'

4s% l

40%

--aaaÒat'

tttt ""..""t"'

.... [55gssed

-self-lnsuredAvg A

Avg Sl

2010 20LL 20L2 2013 2014 2015 20t6

I Crrrfull

. Aging is NOT a major driver (other changes are).' Aging has to be a mean¡ngful contributor considering:

' prevalence of pre-existing conditions with advancing age;. older working age population; and' enhanced weight on presumption in the standard of evidence.

WO R K S A F E

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What ¡s the level and t¡ming of claims cost increases?

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rnNBI

confidentiol Droft - For Discussion purposes only - Not peer Reviewed

WHAT IS THE LEVEL AND TIMING OF CLAIMS COST INCREASES?CASELOAD (I.E., LOST TIME CASES OPEN AT MONTH END)

Figures taken from corporate statistics and financial indicators' Rolling 12 months average lost time caseloads shown

2,000

L,900

1,800

L,700

1,600

1,500

1,400

1,300

1,200

35.A%

3A.A%

25.Aa/o

2A,]Yo

L5,AYO

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s.a%II ' 0,0Yo

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WHAT IS THE LEVEL AND TIMING OF CLAIMS COST INCREASES?LEVEL AND TIMING OF LOST TIME CLAIM CASH PAYMENTS

Figures taken from corporate statistics and financial indicators

' Rolling LZ months average lost time claim cash payments shownSL05,ooo,ooo

Sloo,ooo,ooo

S95,ooo,ooo

Sgo,ooo,ooo

S85,ooo,ooo

S80,ooo,ooo

S75,ooo,ooo

STo,ooo,ooo

S65,ooo,ooo

30.0%

25.0%

20.0%

L5.O%

L0.0%

5.0%

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rnNBI

INFORMATION AVAILABLE WHEN2OL6 AVERAGE ASSESSMENT RATE SET

Funding Level L38o/o

Rate S1.11

Careful

TRAVAII. SEcURITAIRE

WO R K S A T Ê

Attention

2L

WHAT IS THE LEVEL AND TIMING OF CLAIMS COST INCREASES?LEVEL AND TIMING OF LOST TIME CLAIM CASH PAYMENTS

Figures taken from corporate statistics and financial indicators' Rolling L2 months average lost time claim cash payments shownS1o5,ooo,ooo

51oo,ooo,ooo

Sg5,ooo,ooo

Sgo,ooo,ooo

585,ooo,ooo

SSo,ooo,ooo

S75,ooo,ooo

$70,ooo,ooo

S65,ooo,ooo

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25.0%

20.0%

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INFORMATION AVAILABLE WHEN2OL7 AVERAGE ASSESSMENT RATE SET

Funding Level 123%Rate 51.48

EmlutAttlntlon

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22

WHAT IS THE LEVEL AND TIMING OF CLAIMS COST INCREASES?

LEVEL AND TIMING OF LOST TIME CLAIM CASH PAYMENTS

Figures taken from corporate statistics and financial indicators

' Rolling L2 months average lost time claim cash payments shownSL05,ooo,ooo

Si.oo,ooo,ooo

S95,ooo,ooo

Sgo,ooo,ooo

SB5,ooo,ooo

SBo,ooo,ooo

S75,ooo,ooo

STo,ooo,ooo

S65,ooo,ooo

30.0%

25.0%

20.0%

Ls.0%

LO.O%

5.0%

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rTtNBI

COSTS SINCE 2OL7 AVERAGE

ASSESSMENT RATE SET

Careful

TRAVATL sEcuRtrArRÊ

WORKSAFE

Attention

23

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WonKSAFETRnvRII" sËcURITAIRE

WHAT ARE THE SOURCES OF COST INCREASES?

CHANGE IN OPEN LOST TIME CLAIM COUNTS BY NATURE OF INJURY

Assessed Employers Self-l nsu red Em ployers450

400

350

300

250

200

1_50

100

50

1,000

900

800

700

600

s00

400

300

200

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Severe and External

" '. ' OD, Stress and Others

-$p¡¿in, strain and pain

Bruises, Contusions /

I

//

Severe and External. o. o. OD, Stress and Otherso$p¡¿in, strain and pain

Bruises, Contusions

)

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TRAVAtt sËcuRtrArRE

Wo R K S A F E

Attenl¡on

25

WHAT ARE THE SOURCES OF COST INCREASES?CHANGE IN AVERAGE COST FOR PRIOR YEAR CLAIMS EACH YEAR BY NATURE OFTNJURY tN 2016 5

Assessed Employers Self-l ns u red Em ployersS ts,oooS t+,ooo

S i.3,ooo

S tz,oooS t t,ooo

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rnNBI

"sYear

Severe and External

-gp¡¿i¡,

strain and painBruises Contusions

Severe and External

-gp¡¿in,

strain and pain-.--.- Bruises, Contusions

C¡nfulAtttntlon

lilAVl\n .,t ( Utilf/\il{t

WoRKSAFE

26

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Attention

\

What a re the key com ponents of the 2 OI7 rate increase?

I4

Careful

rnNBI

WHAÏ ARE THE KEY COMPONENTS OF THE 2OT7 RATE INCREASE?

souRCE oF ASSESSED EMPLOYERS AVERAGE TNCREASE OF $0.97 (OR SggM) rN2017

Funding Policy

OperationExcluding

Benefits, 0.06(or Ss.slvl)

Policy/PracticeChanges,0.24(or 521.5M)

Hearing Loss,

0.03 (or S2.srvl)

All Figures are Per $tOO of Payroll($ amounts rounded to nearest $O.SM)

Ad m in istration0.04 (ol" 5S.Sruí

WORKSAFËlt¡AV^rt ,¡ { ilr¡tr/rilìl

28

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7nNBI

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WHAT ARE THE KEY COST DRIVERS FOR THE LAST 5 YEARS?BEST ESTIMATE ASSUMING COST TRENDS FLATTEN AFTER 2016

Total increase in costs of$1.01 per $roo of payroll (or $glM| from 2012 to 2016

Funding PolicyOperatÍon Excluding

Benefitr, O,O5

(or $¿.sml

Admínistration,

lor $s,sulPullcy/PructlerHearing Lossn O,O5

{ar $¿.¡lr¡lClungu¡, o87 (or

$zesm¡

All Figures ere Per $100 of payroll

(S amounts rounded to nearest $O.SMI

WoRKSAFEl il/\vAlt '.t r r rt{il/\il{l

30

I Ernlutl

rnNBI

SOURCES OF COST ¡NCREASE FOR ASSESSED EMPLOYERS

BEST ESTIMATE ASSUMING COST TRENDS FLATTEN AFTER 201-6

Total increase in claims costs of50.87 per St00 of payroll (or SZ8.5M) from 2OL2 to 2016

CPPD Annuity, 0.01(or SlM)

Standard ofEvidence, 0.45

(or Sao.sM)

CPPD Pro-rata,0.05 (or S4.sM)

( t'* ".

uF

F*II

Aging makes these

î:iP.-.:i i3:$.1: . . .. q F î a E

Compound effectSTD of E, Supp and

others, 0.21 (or

sleM)

0

F

a

ts

=oLr!À5otF{v!t¡oÀ

x; Ç r lr

Òt

aô

+

tù

â&:

ù'+

ECE, 0.04 NCIC, 0.01(or Sru)

Supplements, 0.10(or Sgrvl)(or Sg.sru)

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Wo R K S A F E

TRAVAII. SEcURIIAIRE

Attention

$ amounts rounded to nearest SO.Snn

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HOW WILL THIS AFFECT RATES FOR 201.8?

Consistent with past va I uati on, 2016 va I uation assu m ptions/methods:

I DO NOT reflect full impact of major shifts since about March Z}LG

I Do keep pace with trends on an averaging period of about 3 years

çAUTION - Had we fully reflected 20L6 trends, vâluation results and fundingrequirements would have been materially different:

I Funding level would be 106.2% tnstead of !LZ,!%(a change of $Za M or $0.10 on the rate for the current funding policy)

I New injury costs:

' per $fOO of payroll for assessed employers would have increased by about $O.SOat a minimum

$8.2 M higher for self insured employers (a 17% increase)

a

a

r7INBI

Careful

TRAVATI sEcuRllArRE

WoRKSAFE

Attention

33

HO\V WILL THIS AFFECT RATES FOR 2018?ACTUAL PAYMENTS MADE VERSUS PROJECTIONS - FIRST QUARTER 2017

Hospitals L2G% t36%

Medical f 09% LZL%

Hearing Loss gB% LL3%

short term Disability LL7% Log%

. Very early results

. Suggests trend is continuing

' Cannot determine from this, how much and for how long?

rnNBI

Benefit Category Assessed Employers Self-l nsu red E m ployers

Cr¡fulAtt.ntlon

l |/\v^[ ',t ( uftil r\Í(lWoRKSAFE

34

HOW WILL THIS AFFECT RATES FOR 201-8? ASSESSED EMPLOYERS ONLYporENTrAL RATE tMpAcr FoR 2018 (pER $roo oF pAyRoLl)

Very preliminary range of possible average assessment rate for 2018considering only at potential claiming pattern trends up to July 2017

a

) Three otential scenarios relative to 2016 cost trends:

New ln.iul,y Costs

Ad m in istration

Target Funding

Total

s1.3s

so.ss

$(0.04)

$1.96

s1.s3

so.ss

$(0.04)

s2.04

s L.83

s0.58*

s(0.04)

52.37

Reversal of Trend Trend Flattens Trend Continues

lncrease from 2017 average rate of 51..48

lncrease per S1OO ofpayroll +S0.38 +$o.so

lncrease % +26% +38%

lncrease in S +$34.0M +$50.5M

+S0.89

+60%

+$80.0M

Careful

TRAvAIL sËcURITAIRE

ìI,ORK5AFË

Attention

35

* Added SO.OS to administration costs due to increased claim volume fTlNBI

FINAL OBSERVATIONS

o Virtually all claims cost factors showing significantupward trends

o No doubt from the emerging claims experience that thesystem is undergoing a fundamental transformation

Changes in standqrd of evidence *Fewer supplements *Aging ol worker populatÍon *Prevalence of pre-existÍ ng condÍtions

Significantlyincreosed

claims costs

rtlNBI

Crr¡lul

WoRKSAFE

36

Thank youConrad FergusonPartner

çferÊusgn @ mornea ushepe ll, com.

rnNBI

Careful

TRAVAIL SEcURITAIRE

WORKSAFE

Attention

37

N EXT STEPS

r Task Force

Crnful

Wo R K S A F E

l|/\V¡il ,t ¡ rrtrtt/r[]lrnNBI 38

RESOURCES

Many resources available at www.worksafenb.ca

r Statistical data requested April L9th

Careful

TRAVAtt sEcuRrrArRE

WORKSAFE

Attentlon

rnNBI 39