Long Term Disability (LTD) incidence rates will be 4.7 per cent higher in 2018 compared to 2017, RBC Insurance forecasts. This rise will be driven by a strengthening Canadian economy, says the insurer.

In making its forecast, the insurer uses a proprietary algorithm. Through this algorithm, RBC Insurance says it has discovered that new LTD claims are correlated to GDP growth rates.

Impacts employees and employers

"Using the RBC Insurance Group LTD Forecast, we predict LTD incidence rates will continue their recent rise and increase by 4.7 per cent in 2018 relative to 2017, which will impact both employers and employees alike," says John Carinci, Vice-President and Head, Operations and Client Experience, RBC Insurance. "Businesses in Canada spent $7.5 billion for LTD coverage in 2016, which is the third largest cost to a group benefits plan after health and dental. Knowing that LTD 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

RBC Insurance explained the reason for the link between GDP growth and higher new LTD incidence. During challenging economic times, workers can be concerned about job security, creating significant mental and/or physiological stress, says the insurer. “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.”

Create contingency plans

"With the anticipated rise in LTD claims, businesses should proactively create awareness of the support available to employees and create contingency plans to ensure adequate staffing," advises Julie Gaudry, Senior Director, Group Insurance, RBC Insurance. "While employees must deal with the significant emotional and financial stress of being off work, business owners can be particularly hard-hit as they lose employees during times of strong economic activity."