disability-insurance-long-term-care

Long-term disability (LTD) incidence rates will be 4.7% higher compared to 2017, driven by a strengthening Canadian economy, finds an RBC Insurance report.

Using a proprietary algorithm, the firm has discovered that new claims are linked to GDP growth rates. Understanding the correlation between GDP and claims can help businesses manage costs related to claims, says the firm.

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“Businesses in Canada spent $7.5 billion for long-term disability coverage in 2016, which is the third largest cost to a group benefits plan after health and dental,” said John Carinci, vice-president and head of operations and client experience at RBC Insurance, in a release. “Knowing that rates are expected to rise is important information that businesses can use to help manage those costs, support their employees and ensure their operations continue to run smoothly.”

How it works

As GDP accelerates and the economy grows, RBC Insurance says there is a corresponding increase in the incidence of long-term disability claims. Conversely, when the rate of GDP drops, so does the incidence of claims.

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At the start of 2017, the model successfully predicted an increase in incidence for the year (relative to 2016) that was fairly close to the actual rate experienced. During challenging or uncertain times, RBC Insurance says workers are concerned about job security and performance, creating significant mental or physiological stress. As the economic outlook brightens and GDP rises, workers may begin to feel more secure and the pent-up stress and anxiety can take its toll, making them more likely to succumb to illness and taking a leave from work to recoup.

“With the anticipated rise in long-term disability claims, businesses should proactively create awareness of the support available to employees and create contingency plans to ensure adequate staffing,” says Julie Gaudry, senior director of group insurance at RBC Insurance.

Here are some tips to help businesses manage claims.

  • Create additional focus on Employee Assistance Programs (EAP) to support employees as GDP rises. These programs can help employees manage certain conditions and work-life issues before spiraling to the point of disability.
  • Create contingency plans to ensure adequate staffing levels during times of positive economic growth including a buffer for potential claims.
  • Look for flexible group benefit plans that have 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.

Also read:

Managing assets for a parent with Alzheimer’s

Registered plans and lifetime benefit trusts

IFIC requests creditor protection for RDSP beneficiaries

Originally published on Advisor.ca
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