Group long-term disability (LTD) rates rise and fall with the cyclical movement of economic growth, RBC Insurance research shows. The research indicates that contrary to what advisors might think, as GDP accelerates, there’s an increase in LTD claims. When GDP drops, so do the claims.
Why would this be?
It’s similar to how a prolonged adrenaline rush puts stress on the body, RBC suggests in a release. During challenging or uncertain economic times, workers are worried about job security and performance, creating significant mental and physiological stress. As GDP rises and the economic outlook brightens, workers begin to feel more secure. At that point, pent up stress and anxiety take their toll, resulting in illness.
RBC says that while most Canadians think the leading cause of disability is physical or due to workplace accidents, the majority of claims are stress-induced, such as mental or nervous system disorders (e.g. depression and anxiety) or circulatory diseases like heart attacks.
Given that one in three employed Canadians will be off work for 90 days or more at some point during their career due to disability, putting off buying insurance isn’t a good risk. The bank predicts LTD incidence rates will increase 2.1% in the last half of 2017 relative to last year, driven by a more positive outlook for the Canadian economy.