For those carriers and owner/operators who are looking for an alternative to the Workplace Safety and Insurance Board, there are several options.
In deciding which plan to choose, it is important to look at the various components that will impact your profits. Does the plan have limitations on different types of injuries? For example: are there limitations on soft tissue injuries on this type of claim? Does the plan limit the benefits for rehabilitation costs? Another issue is whether the plan is medically and financially underwritten at the time of application or at the time of claim. From a financial perspective, does the plan provide only short-term benefits or are there longer benefits/annuity payouts? Finally, will there be rate increases based on experience rating and will the plan be subject to cancellation? If so, it’s time to revisit these contracts.
There are four types of contracts available in the market. The best contracts in the market provide complete medical and financial underwriting up front and no surprises at claim time; no limitations on soft tissue or maximum limits; and cover for both injury and illness. These contracts are called “non-cancellable contracts.” Since they cover both injury and illness, the insurer can never cancel your contract, never increase pricing, or provide limits that expose your fleet statutory accident benefits. You may withdraw from the contract any time.
The second type of contract is a guaranteed renewal contract which again offers you a similar level of safety. They are similar to non-cancellable contracts and you must purchase both with injury plus illness coverage. The application is medically and financially underwritten; again no exposure to your fleet statutory accident benefits. Rates are guaranteed, as well as the renewability of the contract.
The above two contracts are sold primarily in the insurance brokerage market. They also offer an independent owner/operator the opportunity to secure their own occupation to age 65, add partial disability, future savings protection for monthly contributions of RRSP’s, inflation protection, etc. The underwriting process will also consider some beneficial accounting strategies such as income splits and secure pricing.
The cancellable contract, also known as a conditionally renewable contract, is the most flexible in the market. You may purchase “injury only” coverage; it is generally underwritten only at claim time for injury only and underwritten at time of application for illness. The contracts provide limitations on high persistency claims like soft tissue injury claims and lifetime maximums on soft tissue. Rates can increase based on poor claims experience in a specific industrial sector or the insurance company may withdraw, from the specific industrial sector completely. If the insurance company does apply for the increase or withdrawal, they must do this in every province they are licensed to transact business. Another form of a renewable contract is group long-term disability.
Association plans are the most widely sold plans in the transportation industry. Like the cancellable contract, they are the most flexible, easily administrated, and the lowest in cost contracts available in the insurance industry. Like group insurance and the cancellable or conditionally renewable contract, they offer a simple application, very few qualifying questions, blanket amounts of coverage offered based on gross earnings, are medically and financially underwritten at time of claim, flexible, and offer similar limitations including a limitation on total payout “aggregate limits.” They offer the least amount of safety to any owner/operator or transport company in the event of a permanent disability. They may expose the transport company to litigation by the owner/operator or increase your fleet insurance costs.
It is important to note that in spite of the limitations found in both the cancelable, conditionally renewable or association plans, they are still very much needed contracts in the transportation industry. Many individuals may not qualify for a non-cancellable or guaranteed renewable insurance contract due to age, medical history, height, weight, income and number of years in business.
In our article next issue, we will demonstrate the impact of purchasing these various contracts and how they will respond with a typical common claim in transportation.
Lina M. Demedeiros, principal of LMD Insurance and Wealth Management in Etobicoke, Ont., is a financial advisor, specializing in the group and individual benefits market. Since 1994, Lina has represented some of the largest insurance companies in Canada, delivering innovative concepts to meet individual business owners’ needs ranging from risk management to helping people manage their money.