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Employment Insurance – Important Changes That May Affect Your Employees

The Canadian federal government has recently announced that it will be reducing the waiting period for employment insurance (EI) benefits. Starting January 1st, 2017, the mandatory waiting period before EI benefits become payable will be reduced from two weeks to one week. This also means that the EI payment period will be reduced from 17 weeks down to 16 weeks, however the 15 week period of paid benefits will remain unchanged.

What does this mean for employers?

As a plan sponsor of a Short Term Disability (STD) plan qualified under an EI Supplementary Unemployment Benefit Plan (SUB) or an EI Premium Reduction Program (PRP), you will have four (4) years to make the requisite adjustments so that your existing plan can comply with these new changes. The four year “transitional period” will cease on January 3rd, 2021.

What is a Supplemental Unemployment Benefit Program (SUB)?

Service Canada states that the purpose of a Supplemental Unemployment Benefit Program, or SUB, is to “provide supplemental payments to Employment Insurance benefits during a period of unemployment due to temporary stoppage of work, training, illness, injury or quarantine.”1 It is up to the employer to choose which of these types of unemployment to supplement.

How does an EI Premium Reduction Program (PRP) work?

As an employer, if you provide your employees with a short-term disability plan, and the plan meets certain requirements, your company may qualify for lower EI premium rates below the standard employer rate of 1.4 times the employees’ EI premiums.2 Click here to see the list of basic requirements that must be met.

How do these EI changes affect SUBs and PRPs?

Plan sponsors of SUBs may need to make adjustments to their waiting periods, as well as their overall benefit periods, as the waiting period will be reduced to one week, and thus EI payments will start one week earlier. This may result in a premium reduction from your insurer.

The same goes for plan sponsors with PRP plans that currently have waiting periods greater than seven (7) days – these waiting periods will need to be reduced to seven (7) days or less in order to still qualify for reduced EI premium rates, which may result in an increase in premiums charged by your insurer.

All new PRP and SUB plans that take effect on or after January 1st, 2017 must comply with the new seven (7) day waiting period, while plans in-force prior to January 1st, 2017 will have until January 3rd, 2021 to comply.

Still have questions?

Our employee group benefits experts are here to help! Call The Hull Group today for a consultation on your employee benefits, and to learn more about these impending EI changes – (416) 865-0131.

  1. Supplemental Unemployment Benefit Program. (2015, February 02). Retrieved November 26, 2016, from http://www.servicecanada.gc.ca/eng/cs/sub/0200/0200_010.shtml
  2. EI Premium Reduction Program – For employers. (2016, November 08). Retrieved November 25, 2016, from http://www.esdc.gc.ca/en/ei/employers_premium_reduction_program.page

New Appointments to our Management Team

The Hull  Group is very pleased to announce the following appointments within Thomas I. Hull Insurance Limited:

Julian Bugeja

Julian has been appointed Vice President, Personal Insurance.  Julian started with the company over 20 years ago as a Junior CSR.  Over this period he has become a trusted insurance professional amongst our clients and a great department manager.  He has made significant contributions to the overall growth of the company through his own efforts and by assisting his staff with their own new initiatives.  Julian is often praised by our clients for the high level of quality service that he provides, which is the foundational strength of our Personal Insurance Department.

Olivier Bue

Olivier has been appointed Vice President, Commercial Insurance.  Olivier joined The Hull Group in 2008 to focus on growing our commercial book of business.  Early on, Olivier showed strength in the marketing side of the business, as well as a keen interest in some of the more “complicated” coverages.  During his 8 years at The Hull Group, Olivier has become very well respected in the insurance marketplace, and has introduced The Hull Group to a number of new markets.  He has developed exceptional product knowledge, which has been very effective in differentiating us from our competitors. Olivier is also very well respected with our clients for his level of knowledge and expertise.  With regards to new business development, he has consistently delivered results and continues to come up with new ideas on how to grow our business.  Olivier is a strong mentor to other colleagues and a leader in developing a sales oriented culture at The Hull Group .

Both Julian and Olivier will be joining The Hull Group’s Management Team going forward.  We are excited about the future and the growth opportunities for the company.

Congratulations Julian and Olivier; well deserved!

Action Required NOW to Maintain Grandfathering Status of Your Life Insurance

The Canadian government has for many years been examining the life insurance industry, looking to reduce the tax favourable treatment of life insurance products. For many years Canadians have had access to the only three remaining tax-sheltered financial vehicles (our personal residences, TFSA’s and life insurance) used to create, protect, and preserve wealth. Now the government is looking to reduce the tax effectiveness of one of these cornerstones – life insurance.

On Jan. 1, 2017 new tax rules become effective, adversely impacting life insurance policies acquired after Dec. 31, 2016. The effect of the pending changes will serve to increase annual out-of-pocket expenses for life insurance while reducing long term cash values and death benefit growth, when compared to policies issued in 2016 or earlier.

GRANDFATHERING

There is still an opportunity to protect yourself from the upcoming changes. Life insurance policies issued in 2016 and providing permanent lifetime death benefits will be grandfathered and will remain unaffected by the upcoming changes taking place Jan. 1, 2017.

As such, you should review your life insurance. If you have been thinking that perhaps you need additional insurance or that you should be converting your existing term insurance into insurance that provides lifetime benefits to your family, then you should consider taking action NOW to avoid the impact of the upcoming changes. And you need to act urgently. The insurance companies are forewarning that to guarantee a 2016 issue policy, the application and all underwriting requirements need to be received by the insurance company by September 1, 2016. This is the minimum required lead time the insurers need to process and issue new contracts that will retain their beneficial grandfathering status.

Acting prior to September 1, 2016 will allow you to retain significant benefits that will not be available to consumers who acquire life insurance dated after the Jan. 1, 2017 implementation date. These include:

  • Avoiding anticipated premium increases of approximately 5-10% per year, payable for life with possible cash value reductions. The amount of this increase will vary based on age, plan and insurer.
  • Taking advantage of younger insuring age. Life insurance pricing is based on one’s insuring age. Deferring a decision to purchase life insurance by six months may result in an older insuring age and an increased premium of approximately 4-5% annually payable for life. Again the amount of the premium increase will vary based on age, plan and insurer.
  • Total combined additional premium of 9-15%: That’s the combined impact of the added premiums payable for life arising from higher insuring ages & the upcoming change to the rules governing life insurance.
  • Avoiding reductions in the Capital Dividend Account: for corporate owned life insurance policies, the amount of the TAX-FREE benefit available through the Capital Dividend Account will be reduced for policies issued AFTER Dec. 31, 2016.

Change is coming in 2017. However, it’s not too late to take advantage of these benefits before time runs out; call The Hull Group before September 1, 2016.

Change is Coming for Ontario Auto Insurance

Typically, when people hear the words “change is coming”, it stirs up feelings of uncertainty and perhaps concern. But change is a necessary means to continuous improvement. As Bob Dylan once said, “there is nothing so stable as change”.

In an overall effort to make automobile insurance more affordable in Ontario, the provincial government has introduced a number of changes to the auto insurance system that will take effect on June 1, 2016. If you already have a policy in force prior to this date, the changes will take effect on your policy at the next renewal date that falls on or after June 1, 2016. Summarized in detail below are the following changes that are being rolled out: definition of minor accidents, interest rates for monthly payment plans, comprehensive coverage deductible, and last and perhaps most importantly, Statutory Accident Benefits (SABs).

Definition of Minor Accidents. Insurance companies will no longer be able to use a “minor at-fault accident” that occurs on or after June 1, 2016 to increase your rates. A minor at-fault accident is defined as one in which no payment has been made by any insurer, there are no injuries, and damages to each car and/or property are less than $2,000 per vehicle and are paid by the at-fault driver. This provision is limited to one minor accident every three years.

Maximum Interest Rates for Monthly Payment Plans. Prior to these new reforms, the maximum interest rate for monthly payments was set at 3%. Effective June 1, 2016, this maximum rate has been lowered to 1.3% for one year policies, with corresponding reductions for shorter terms.

Comprehensive Coverage Deductible. The standard comprehensive deductible has been increased from $300 to $500. Policyholders still have the option to quote their deductible at lower or higher amounts, but unless otherwise requested, new policies with this coverage will now be quoted at $500.

Statutory Accident Benefits (SABs). The key changes to Ontario SABs include:

  • Revised definition of “catastrophic impairment”: The revision to this definition is driven by the intention of capturing only the most seriously injured persons. The new catastrophic impairment definition can be viewed as a significant narrowing of the current definition.
  • Reductions in SABs limits: There are three major changes here:
    • Reduction in the benefit limits for non-catastrophic injuries and the duration that benefits are available
    • A major reduction in the scope of “non-earner benefits”
    • A reduction in catastrophic impairment benefit limits

Despite reductions in certain SABs limits, policyholders can still purchase optional increased limits, now at higher limits than previously available. Click here to view a helpful summary chart of the above changes.

 

Overall, these changes are meant to provide insurance consumers with more flexibility when choosing certain coverages/limits that can affect how much premium they pay. By lowering certain SABs limits, the idea is not to limit coverage for those who need it, but to lower the base amount and give the consumer more choice as to how much coverage they are comfortable with. The benefit of this is also twofold, as lower limits can also deter and prevent fraudulent accident benefits claims.

Change is coming on June 1st, however it is always important to review your coverages and know what options are available to you. Having a knowledgeable broker on your side can help you navigate the technical aspects of your policy, and help you decide what’s right for you.

Take Care Before You Share

Of the countless hot button issues surrounding emerging technologies, the “Sharing Economy” seems to be right at the epicenter. Transportation Network Companies (TNCs) such as Uber and short term property rental services like Airbnb have offered efficient and cost effective alternatives to traditional services, resulting in exponential growth in both the adoption and continued use of these platforms. As these technologies become increasingly widespread, more and more people are recognizing the potential for additional income that can be earned by sharing the very assets they use in their day-to-day lives in exchange for a fee. Also an emerging concept is the notion of financing the purchase of an asset (such as a home or vehicle) with the use of that asset itself. As attractive and simple as this additional earning power may seem, the potential pitfalls of what can happen if something goes wrong should not be overlooked.

For example, the standard auto policy in Ontario has a specific exclusion for carrying passengers for compensation. Under section 1.8 “Who and What We Won’t Cover”, it specifically states there is no coverage “if the automobile is used as a taxicab, bus, a sightseeing conveyance or to carry paying passengers.” Should someone use their own vehicle insured under a personal insurance policy to carry passengers as part of an agreement with a TNC, there would be no coverage for any vehicle damage, or bodily injury sustained by anyone inside the vehicle should an accident occur. The ramifications of a potentially uninsured loss are compounded by the fact that the driver may then become the target of litigation from the passenger, since there is no insurance from which to seek recovery for injuries.

Similarly, most standard home insurance policies in Canada exclude different variations of commercial activity taking place on the premises. Some insurers provide coverage for “occasional rentals”, however the definition of this type of activity may vary widely from company to company, and specific coverage may still be limited in its scope. This makes it all the more important to disclose this activity to your insurance company and verify if coverage exists, and what options are available should additional coverage be required.

A number of prominent home and ride-sharing companies have declared that they have large commercial liability policies in place that protect both the end user, as well as their “contracted” service providers. However, the coverage afforded by these policies is not always so straight forward. In many cases, the policies carried by these large companies are “contingent” policies, meaning that they only respond when another policy (e.g. personal auto or home policy) fails to respond. This leaves the potential for significant delays in claim settlements and payouts, as well as gaps in coverage. For example, a typical TNC contingent policy may afford coverage while a driver is carrying or en route to pick up a passenger that has hailed them with a ride-sharing app, but not when driving around awaiting a potential fair. This potentially leaves the driver uninsured during this stage of ride-sharing, as most personal insurers consider the act of driving around awaiting potential passengers a type of commercial vehicle use.

Are coverage options available at a personal level?

Yes – but some are very expensive, and some are very new and undeveloped.

Commercial or Landlord property policies are nothing new to those who make a living renting out dwellings to tenants, however the additional premium that insurers charge for these policies may be cost prohibitive to someone renting out their home on an occasional or short term basis. Similarly, individual commercial vehicle policies, which licensed taxi cabs are mandated to carry, are available to insure drivers who carry passengers for compensation, however these policies are usually several times the going rate of a personal auto policy.

Some insurers are now beginning to offer various coverage endorsements that will allow limited participation in Sharing Economy services. For instance, in early February 2016, Aviva Canada introduced an add-on available on their personal auto policies that protects ride-sharing drivers who perform these services for up to 20 hours per week, subject to certain eligibility criteria. Although this is certainly a step in the right direction, Aviva is one of the few (if only) options available at a personal level, and much is yet to be determined regarding rating and eligibility once the profitability of this coverage is eventually established with more data.

Key Takeaways:

  • The extra earning potential from sharing your home or vehicle is great, but the potential for coverage complications in the event of a loss are even greater
  • Most personal insurance policies exclude sharing economy activities
  • Many TNCs and property sharing communities have “contingent” liability policies to protect end users and “contracted” service providers, but complications still exist as to when coverage is triggered
  • Talk to your broker if you are considering sharing your home or automobile. Coverage options are still developing, and your broker can advise you if any of them make sense

Prevent Water Damage Before It Happens

According to a study by Aviva Canada Inc., the average cost of a water damage claim in Canada has risen from $7,192 to more than $15,500 over a 10 year period 1. The study further finds that approximately 40% of all home insurance claims are due to water damage.

With the arrival of spring comes the inevitable transition of cold to wet weather, meaning the potential for water damage losses can be at its highest during this time of year. This month’s edition of The Hull Group News offers some tips to prepare for and prevent water damage, as well as what to do in the event of a loss.

Being Prepared

  • Do some research. Is your neighbourhood prone to flooding or sewer backup? Talk to neighbours who have lived in the area for a while to see if they have experienced issues with drains, sewers, or sump systems.
  • Maintain a detailed and up to date home inventory. The benefits of this are twofold; not only will you have an accurate idea of how much insurance you should carry, but this will also make your life easier in the event that you need to submit a claim to your insurer by having necessary information already on hand. The Insurance Bureau of Canada has a helpful form for compiling a detailed home inventory.
  • Familiarize yourself with your insurance policy. Often times, policyholders don’t know exactly what they have coverage for until it comes time to make a claim. For example, sudden and accidental bursting of pipes or appliances resulting in water damage is covered by most property insurance policies, however some policies exclude resulting damage when the water escape is caused by freezing. Different options for sewer backup (i.e. water damage from the backup of drains, sump and sewer systems) coverage are typically offered as an add-ons to standard property policies. It is important to check with your broker to see if these coverages have been included on your policy.

Being Preventative

  • Install a sump pump. This prevents ground water from entering your basement. Many insurers offer discounts for clients who install sump pumps, and your municipality may offer plumbing inspection services or a subsidy for installing a sump pump or backwater valve.
  • Check for common sources of water damage. Downspouts and eaves troughs should be checked every spring and fall season to make sure they are not blocked. Keep toilets and drains free of grease and other objects than can cause blockage. Also, the age and type of pipes in your home or business can be more prone to damage or blockage; older clay pipes can be more susceptible to this, so consider replacing with more modern PVC or ABS pipes.
  • Install an inline backwater valve. This can help prevent sewer backup if installed properly by a licensed plumber. However, it is important to check with your municipality to see if local bylaws permit this.

Know how to Respond in the Event of a Loss

  • Keep calm and call your broker or insurance company right away. Most insurers have 24 hour claims lines.
  • Move any undamaged or slightly damage property away from the wet area to prevent further damage. After separating undamaged and damaged property, prepare an inventory of what has been damaged or lost. Take photos to document, and if possible, gather any receipts or proofs of purchase.
  • DO NOT touch any electrical wires, devices or appliances.
  • DO NOT turn on any taps or flush any toilets if water damage is a result of sewer backup. This will only cause further damage.
  • Keep receipts of any clean up expenses or costs incurred to prevent further damage. Most insurers will reimburse their clients for any reasonable costs incurred to mitigate a loss.

Spring can be a season of beauty; don’t let water damage rear its ugly head. Be prepared, preventative, and ready to respond to whatever the change of seasons brings your way.

 

[1] Canadian Underwriter, “40% of all home insurance claims are due to water damage, insurer says” (2013), available at http://www.canadianunderwriter.ca/insurance/40-of-all-home-insurance-claims-are-due-to-water-damage-insurer-says-1002216855/.

D&O Insurance: Important Protection for Important People

The most common misconception about Directors and Officers (D&O) insurance is that this coverage is only a necessity for large, publicly traded companies. Smaller companies with fewer shareholders may think their exposure to these types of claims may be minimal or nonexistent; however, private companies can face “professional liability” claims from several sources: employees, investors, creditors, customers, competitors, and government agencies just to name a few. The cost alone of defending such claims can sometimes be enough to cripple a business, with settlements and payouts being even more financially devastating.

D&O Insurance Defined:

Directors and Officers insurance is a type of liability insurance (payable to the directors and officers of a company or the organization itself), which covers these individuals/companies for claims made against them while serving as an officer of the company or on the board of directors for any alleged wrongful acts in their capacity as directors or officers.

What are some of the top reasons for private companies to carry D&O insurance?

    • Employment Practices Liability. Claims of workplace discrimination, sexual harassment, and wrongful dismissal can happen regardless of a company’s size or stature. These situations can be even more pronounced in smaller companies with a more hands-on management team.
    • Peace of mind when taking on investors. Those investing in a business expect to eventually see a return on their investment. However, if a business ends up failing and investors lose their money, they will look to recover it by way of legal action against top executives.
    • Personal asset protection. Directors and officers of private companies may have a fair bit of their own money and assets invested into their company, which can subsequently get dragged into defense costs, settlements, and judgements if found liable for any wrongful acts while operating in their duties.
    • Legal expenses. Companies can still get drawn into litigation even if claims of alleged wrongful D&O acts are groundless, and the costs to defend such unfounded claims can add up quickly.
    • It is now more affordable than ever. The market for D&O insurance has grown substantially over the past decade, with most insurance providers offering some form of coverage. Depending on the size of your company, D&O insurance premiums may only represent a small additional cost in proportion to the rest of your insurance coverage.

 

Perhaps most importantly, having a sound D&O insurance program in place offers peace of mind to management, allowing them to better focus their efforts on other important areas such as business growth and smooth operations. Getting a quote is easy – speak to one of our commercial insurance experts today about what options make sense for your business.