Research conducted by RBC Insurance Group reveals that long term disability (LTD) claims tend to rise and fall in tandem with the gross domestic product (GDP).
One might think that disability claims would increase when the economy worsens, but a study conducted using using a proprietary algorithm developed by RBC Insurance shows that when the GDP drops, so do the incidence of claims.
The insurer compares this phenomenon to a prolonged adrenaline rush putting stress on the body. "During challenging or uncertain economic times, workers are worried about job security and performance, creating significant mental and/or physiological stress," reads the report. "As GDP rises and the economic outlook brightens, workers begin to feel more secure and that pent up stress and anxiety takes its toll, which results in them succumbing to illness and taking a leave from work to recoup."
Data from more than 300,000 group benefit clients
RBC Insurance has collected data from more than 300,000 group benefit clients over six years and come up with an algorithm that can help predict disability rates up to two years in the future when using RBC economic forecasts. For this year, the insurer predicts that LTD incidence rates will decrease by an average of 3.2% during the first half of 2017 when compared to the last six months of 2016. However, by the end of 2017 LTD incidence rates are expected to be 2.1% higher than last year due to a more positive outlook for the Canadian economy.
"For years we observed cyclical trends with the claims we were seeing but thanks to the team's efforts and many late nights developing and analyzing the algorithm's data, we have a much clearer picture around the timing of new LTD claims," says John Carinci, vice-president, group & business markets, RBC Insurance. "We're hoping that by sharing this information we can help employees and businesses proactively manage and prepare for these claims."