Crunching the Compensation Numbers

John Denham, CIO at the Workplace Safety & Insurance Board, is pushing to shift investments and take the agency to a fully funded position by 2027

Innovation within a government bureaucracy? One such agency is proving that it can be done. Legislated by the Ontario government and created to administer the Workplace Safety & Insurance Act, the Workplace Safety & Insurance Board (WSIB) is one of North America’s largest insurance companies, administering compensation and no-fault insurance for Ontarians. And though the group faced a funding crisis over the past decade, things are now back on track thanks to a broad and unprecedented plan to streamline and reform the agency based on progressive return-to-work and health-care strategies.

John Denham is the chief investment officer for the WSIB, overseeing a small but important team of eight employees dedicated to improving the agency’s strategic-investment plan and implementing a risk-management system, which, combined, will help the organization complete its rebirth. Denham, a Toronto native who came to the WSIB from IBM and Xerox, where he managed global assets of $10 billion, says his background in mathematics, accounting, and auditing has helped him develop a curious and critical mind suited to leading the board during this crucial period. He has been tasked with developing a sustainable, long-term investment plan to cover the interests of plan beneficiaries and plan sponsors alike.

Now in his ninth year, Denham continues to work with others on the executive committee to push forward WSIB president David Marshall’s vision to rebuild the agency, improve its financial outlook, and enhance its service to injured workers and their employers. To accomplish this, Denham has had to reboot a system plagued by “unfunded liability”—subtle terminology for insurance obligations totalling more than the assets available to fund them. “Costs were too high, and the premiums we were collecting from employers were too low,” Denham says.

5 Questions
with John Denham


1. What does innovation mean to your company?
Creating a better experience for injured workers and employers through service excellence, better recovery, and return-to-work outcomes—all while supporting financial sustainability.

2. Is there a technology, trend, or idea that’s driving your company forward?
Technology change is currently driving process and service efficiencies and improvements that will drive us forward. Specifically on investments, we are implementing a risk-measurement system that will drive better understanding and validation of investment risks.

3. How do you innovate on a day-to-day basis?
Through hard work and diligence, including extensive research and analysis.

4. Where do you hope this innovation will lead you in the next five years?
To improved services and outcomes for injured workers and employers, to improved funding levels for the system, and to meeting legislated funding requirements.

5. How has the notion of innovation changed in the past decade?
Technology, including mobile and social media, has dramatically changed how we develop and implement our ideas.

The WSIB had reached a funding-status position below 60 percent, but its financial team analyzed the situation and saw a novel solution: they could intervene to get injured workers back to work faster through new return-to-work initiatives. “If we can help someone get better and back to work in three months instead of nine months, we’ve returned a worker to productivity and reduced the benefit costs in the system,” Denham explains. This measure, combined with a modest increase in premiums, has helped the agency make strides, and things are already moving in the right direction, with premiums slated to stay level in 2014.

The WSIB’s efforts have been catalyzed further by government action. Lawmakers have passed regulations and set target dates to take the agency to a fully funded position, so the WSIB now has specific goals to be 60 percent funded by 2017, 80 percent by 2022, and fully funded by 2027.

The agency will do so by continuing to implement the aforementioned return-to-work and health-care strategies. “A worker left alone takes longer to get back to work,” Denham says. “We can step in to assist and speed up the process with specialists and programs of care.” Additionally, new technologies such as the Teleclaim system and mobile solutions are helping employers and injured workers get the services they need more quickly than ever before.

For the past 10 years before 2011, the WSIB had been extracting an average of $500 million from its investment fund to run operations and pay annual benefits. With the recent improvements, the group became cash-flow neutral in 2011 and actually added $300 million to its investment fund in 2012. In 2013, it added $500 million. Denham has driven the change by shifting the WSIB’s investments away from a blended portfolio of 40 percent bonds, which rise and fall with interest rates, and 60 percent volatile public equities. “We had to go build a better mousetrap and reduce volatility while maintaining our desired rate of return and reducing risk,” Denham says. He embarked on a two-year research kick and developed a strategy to reduce volatility by 30 percent through diversification in real estate and infrastructure investments and a reduction in allocations to equities.

Denham’s new risk-management system is helping to track all this by monitoring performance. It’s yet another important step toward ensuring that the WSIB can continue to serve injured workers and their employers in Ontario. Today, the agency is 80 percent into the implementation of its strategic investment plan, and by completing the final push, Denham and his team will help solidify the system’s sustainability over the long term.