New Research Helps Businesses Predict When Disability Is More Likely To Occur

Authored By: Julie Gaudry | Publish Date: May 26, 2017

What if businesses could estimate with accuracy when disabilities are more likely to occur? Given that one in three employed Canadians will be off work for 90 days or longer at some point during their career due to disability, this information could provide significant advantages.

Long-term disability claims can negatively impact both employees and businesses. In addition to the effects of their medical condition, employees also face the significant emotional and financial stress of not working.  And business leaders, especially of smaller operations or departments where the employee fills a critical role, will feel the loss more keenly if it happens at a time when the economy – and business – is picking up.

LTD Claims Tied To GDP

While many may think that long-term disability rates rise when times are tough, it turns out that when the economy is on an upswing is exactly the time that long-term disability claims are more likely to occur.

By using data from over 300,000 group benefits clients since 2009, we discovered a direct link between LTD incidence rates and the rise and fall of GDP. Through extensive analysis and the development of a proprietary algorithm, the RBC Insurance Group LTD Forecast can predict LTD incidence rates up to two years in the future when using RBC Economic forecasts or six months into the future when using current GDP values – a helpful tool for businesses of any size.

It may seem strange that claims increase when times are good, but it’s actually akin to our body’s reaction to the stress of a prolonged adrenaline rush. When economic times are tough, employees worry about their job security and performance, which creates significant mental and/or physiological stress. As GDP rises and the economic outlook brightens they begin to feel more secure, but that pent up stress and anxiety takes its toll. At this point, the employee can succumb to illness and may require a leave from work to recoup.

The findings also support the fact that, contrary to what many Canadians think, the majority of LTD claims are stress-induced, from mental or nervous system disorders, such as depression or anxiety, to circulatory diseases such as heart attacks.1

Cost Savings Potential

Considering businesses spent almost $7 billion for LTD coverage in 2015, (the third largest cost to a group benefits plan after health and dental),2 the groundbreaking findings of this research can provide real cost-savings potential – along with a range of other workplace benefits. By using this predictive insight and understanding the correlation between GDP and LTD claims, businesses can better anticipate and manage costs related to claims and help prevent some from happening altogether. By proactively increasing focus on supportive resources available such as employee assistance programs (EAP) and putting contingency plans in place to support employees when they need it the most, you can help them get back on their feet quickly after an illness.

Tips To Help Businesses And Employees

  • Business leaders, HR departments and managers can be more attentive to employees during economic downturns to ensure they are aware of the resources available to help them cope with stress and uncertainty
  • Increase focus on employee assistance programs to assist employees as GDP rises
  • Proactively create plans to ensure adequate staffing levels during times of positive economic growth to reduce the impact of an employee’s absence on the business, including a buffer for potential claims
  • Review Group Benefit plans annually to ensure you have the right one in place for your specific business needs
  • Look for plans that have flexible options such as allowing employees to return to work on a part-time basis while still receiving benefits
  • Ensure employees understand the coverage in their plan and make use of any ‘Return to Work Benefits’ such as financial planning, rehabilitation, and other services to help make a smooth transition back into the workplace

Giving employers the tools to predict the incidence of LTD claims allows them to plan and mitigate those risks to help keep their operations running smoothly during critical periods. Combining the right information on a timely basis with a proactive approach to supporting staff can ultimately result in productivity gains through a healthier, happier, and more engaged workforce.

Julie Gaudry is senior director, group insurance, at RBC Insurance and is responsible for the overall management of its group benefits business.

  1. RBC Insurance Survey 2014
  2. Fraser Group – Group Universe Report July 2016

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