Policies and Procedure
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By John Carinci

One in three employed Canadians will be off work for 90 days or longer at some point during their career due to disability.

Many HR professionals are all too aware of the negative impact long-term disability (LTD) claims can have for employees and businesses alike. Employees must deal with the discomfort of the medical condition itself, along with the significant emotional and financial stress of being off. And business owners, 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 booming.

LTD claims linked to GDP

It turns out that this is exactly the time when most LTD claims occur – when the economy is on an upswing, as RBC Insurance discovered following years of research.

There has long been an awareness of seasonal disability trends, with new claims tending to peak in the spring and fall months, and dropping during the summer. However, by using data from over 300,000 group benefits clients since 2009, a direct link was discovered 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 now 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 at first glance and even contrary to reason that claims increase when times are good. But the belief is that it’s similar to a prolonged adrenaline rush that puts stress on the body. When employees are worried about job security and performance during challenging or uncertain economic times, it creates significant mental and/or physiological stress. Once the stress diminishes, thanks to a brighter economic outlook and rising GDP, they begin to feel more secure again.

If employers can predict the incidence of LTD claims, they can also plan to mitigate those risks and help keep their operations running smoothly during critical periods. However, that pent-up stress and anxiety takes its toll, which results in them falling ill and taking a leave from work to recoup. This aligns very well with the fact that 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, according to an RBC Insurance survey.

Cost savings potential

The groundbreaking findings of this research can provide a range of benefits for the workplace, along with real cost-savings potential. According to a 2016 report from the Fraser Group, businesses spent almost $7 billion for LTD coverage in 2015, which is the third largest cost to a group benefits plan (after health and dental). By using this predictive insight and understanding the correlation between GDP and LTD claims, businesses can better anticipate and manage costs related to claims; prevent some from happening altogether; or even reduce their duration.

This can be achieved through proactive measures such as implementing or increasing focus on employee assistance programs (EAPs) and putting in place contingency plans to support employees when they need it the most to get back on their feet quickly after an illness.

Some tips to help the business and employees:

• Create additional focus on EAPs to assist employees as GDP rises
• 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
• 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

As Benjamin Franklin once said, “An ounce of prevention is worth a pound of cure.” If employers can predict the incidence of LTD claims, they can also plan to mitigate those risks and help keep their operations running smoothly during critical periods. Coupling the right information on a timely basis with a proactive approach to supporting staff will ultimately result in productivity gains through a healthier, happier and more engaged workforce.

John Carinci is vice president, Group and Business Markets at RBC Insurance.

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