Already staggering under rising medication prices, insurers must now cope with an onslaught of mental illness claims. Poised to become the main cause of long-term disability in group insurance, these disorders are rapidly making inroads in the insured population. As a form of damage control, insurers are turning to rehabilitation programs.
The industry has few global statistics on this topic. “The problem is so vast that we don’t have the figures,” said Bernard Dalbec, President of Solareh. His analysis of 10-year periods found that mental illness is currently behind 50% of cases of work stoppage in long-term disability insurance. In 1990, about 30% of disability claims were linked to mental illness, whereas the incidence in 1980 was a paltry 15%.
“In wage insurance, long-term disability is the most serious problem, because of the amounts required to indemnify the insured until the end of the coverage period,” Mr. Dalbec noted. The insurer must set aside sufficient amounts to indemnify the client from the start of disability until the insurance period expires, usually when the customer reaches age 65. In short, the quicker the insured returns to work, the less the insurance company has to pay.
Solareh also offers psychosocial assistance services and helps clients who are on disability leave for various reasons to return to work. Disability caused by a psychological ailment affects more than 90% of the firm’s clientele. “And we are only scratching the surface of our clients’ needs,” commented Mr. Dalbec.
“Depression could become the world’s leading cause of disability,” says Barry Noble, Manulife’s National Director of Managed Care. “For example, we are seeing an increase in instances of 20th Century Syndrome where more and more people are becoming ‘allergic’ to modern society, and are starting to shut themselves off from it. Some go so far as to refuse to leave their homes. This is a phenomenon that did not exist thirty years ago, and which is caused by the appearance of new technologies and rapid societal evolution, among other things.”
Long-term disability insurers have a vested interest in tracking the growth of this phenomenon. At Industrial Alliance, some 36% of monthly benefits are paid to individuals disabled because of mental illness, whereas in 1995, this figure stood at 30%. “The second leading causes of disability – circulatory and musculoskeletal problems – are tied at 15%,” said Diane Bessette, Life and Disability Settlements Manager.
At Blue Cross, Pierre Marion, Group Insurance Sales Manager, commented that wage insurance claims associated with mental problems now account for between 38% and 40% of total claims. “Mental illness grew sharply at our company, by about 40% in the past five years,” Mr. Marion said. For now, the situation has stabilized but it may aggravate in a recession. “In insurance, recessions have a direct impact on the number of disability claims arising from mental illness.”
Desjardins Laurentian Life Assurance (DLLA) concurred with Blue Cross’ findings: the proportion of disability due to psychological illness stands at roughly 40%. “For some groups, the rate is higher than 50%,” said André Simard, Vice-President, Sales, Group Networks.
Annette Gibbs, Vice-President of Disability Claims at Maritime Life, reported that mental illnesses are accounting for a growing proportion of claims: “In 1998, mental illness accounted for 22% of claims; in 2000, that number rose to 24%,” she said.
At SSQ Life, a Quebec-based company that specializes in group insurance, and that had $650.8 million in premiums in 2000, mental illness is impacting short-term wage insurance, mainly by propelling the average duration of disability upward by 20% in six years. “The average duration of disability due to mental illness rose to from 66 days in 1994 to 78 days in 1999,” said Carl Laflamme, Vice-President Sales and Marketing, Group Insurance. In comparison, the duration of all of the other causes has remained stable, at about 75 days.
Rehabilitation: a major asset
The prevalence of mental illness in short-term disability also increased at SSQ Life between 1994 and 1999: it climbed to 23% in 1999 from 17% in 1994. SSQ attributes this rise to the decrease in other causes of disability during this period.
Since the early 1990s, insurers have chosen to go beyond their role of simply disbursing indemnities. They now take action with clients and their employers to accelerate as much as possible the return to work. “Insurers invest about $15 million in rehabilitation in Quebec each year. Back in 1984, the industry didn’t make any investments. It stands to reason that a good portion of this amount is earmarked for psychological disorders,” explained Mr. Dalbec.
Mr. Laflamme agreed: “At SSQ Life, rehabilitation efforts are largely focussed on mental illness. We have noted that there is a greater chance of a return to work if we act quickly in these cases.”
Wage insurance analysts occasionally draw on psychiatric expertise to help evaluate mental illness files. Attending physicians are also consulted, and employers are included in the rehabilitation process.
“In the last three years, we have increased the amount of consultation time with psychiatrists for the Ontario region. Three years ago, we dealt with two psychiatrists. Today, we deal with four,” Ms. Gibbs noted.
Solareh’s Posaction program trains employers to screen employees who would be good candidates for rehabilitation. According to data gathered by DLLA in 1997, 50% of cases of depression are not detected and consequently hamper employee productivity.
“Many mental illness claims are directly linked to the workplace,” added Ms. Gibbs. Manulife’s Barry Noble echoes this belief, adding that “work in itself must become a positive experience for the employees. This is something that we must help employers to understand.”
Rehabilitation programs may be gaining popularity among insurers, but their track record is largely inconclusive. Although most of these programs are still in their infancy, insurers have noted a positive impact on the bottom line. “The most conservative estimates foresee a 500% return on investment,” stated Mr. Simard.