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Underwriting and Claims

You say Zed, I say Z: Differing Disability Claims Data

disability survey long

In November 2017, RGA released its 12th biennial Group Disability Claims Benchmarking Survey – the only comprehensive survey that compares critical operating and business practices among insurers of group disability insurance claims in the U.S. and Canada.

The survey offers key information on staffing structures, claims management practices and outcomes for short-term disability (STD) and long-term disability (LTD) group insurance. This year, a record-high 31 carriers participated in the survey.   

In reviewing the survey, I noticed some interesting points that warranted additional exploration and commentary, which I have outlined below. My objective was to provide some insight as to what may be driving the differences in the survey results between the two countries. I admit I have only scratched the surface as to the possible causes behind some of the differences; and I leave it to you to determine other possible reasons for the differences, considering your specific market and corporate culture. Ultimately, my hope is that we can learn from each other to enhance claim management practices in our industry.    

U.S. carriers reported improvement in speed of STD and LTD claim decisions (2015 to 2017)

Compared to 2015, U.S. carriers reported faster STD claim decisions in 2017. This was most evident within the large carrier segment (combined open STD and LTD claims of 30,000 or more), which averaged 37.7% of claim decisions being made within three days, a notable increase from 28.8% in 2015. Conversely, Canadian carries reported slightly longer decision-making times than they did in 2015, from 19.6% to 12.4%. For 2017, U.S. insurers reported that nearly 20% of their STD claims were paid within three days, compared to 12.4% in the Canadian market.

  • Auto-adjudication of some of the more standard STD claims with conditions such as pregnancy and those requiring routine surgeries with defined durational guidelines may account for the faster turnaround times reported by large U.S. insurers.  

Canadian carriers reported that 58.4% of their LTD claim decisions were made within 30 days. This was only a slight decrease from their 2015 data (58.7%). While U.S. carriers made fewer claim decisions within 30 days than Canadian carriers, they did report improved turnaround times on LTD claims, from 47.9% in 2015 to 55.7% in 2017.

Canada has more than three times as many active1 mental health claims as the U.S. (27% vs. 8%)

A number of factors contribute to this difference in the number of claims.

  • Canadian carriers cannot legally limit LTD benefits to a maximum of 24 months for claimants with a primary mental health disability as is common practice in the U.S.
  • Canada treats all conditions equally under the law when it comes to disability insurance, which, besides increasing the number of mental health claims, has an ameliorating effect on people’s beliefs and perceptions about mental illness. In the U.S., on the other hand, mental health conditions still carry a stigma, making it less likely that people will seek or comply with treatment.2   
  • In some circumstances, it could take several months for a Canadian with a mental health condition to be seen by a psychiatrist. Delaying necessary treatment for a mental health condition often increases its severity, and, in turn, its duration.   Delaying mental health treatment can also lead to increased morbidity and mortality. 
  • While there could, theoretically, be an equal number of U.S. claimants unable to work due to mental health conditions, claimants in the U.S. have more incentive to claim comorbid conditions from the start or later claim disability due to a physical condition in an effort to extend their benefits beyond the 24-month limit. If the claim is then approved for continuing benefits based on a physical condition, the primary mental health diagnosis, as reported by the insurer, will change to the new primary physical diagnosis, thus affecting the U.S. data provided for the benchmarking survey.

Canadian insurers return nearly half of their claimants to work   

When it comes to getting disabled claimants back to work, Canada is far more successful than the U.S. (47% vs. 28%).     

  • According to our survey, Canada has a higher proportion of vocational rehabilitation services in-house to assist claimants with all aspects of the RTW process. While both countries have similar laws in place to provide equal rights to the disabled and promote reasonable accommodations that would allow disabled claimants to RTW, Canadian insurers appear to be much more effective in collaborating with policyholders to return claimants to work.
  • One of the many strategies used by Canadian insurers is to pay for resources and interventions that they expect will return the claimant back to work. While the return on investment is unknown, based on the RTW percentage, it is clear that Canadians are spending their medical and vocational case management dollars wisely.

Conclusions

So what can we learn from this compare-and-contrast exercise?

Large U.S. insurers appear to be improving their turnaround times on adjudicating STD claims with the help of claim automation tools. As we know, technology is always improving and generally becomes more affordable with time. It is reasonable to anticipate that mid-sized and smaller carriers in the industry will adopt claim adjudication technology.

Mental health claims aren’t going away any time soon, considering that the world is becoming increasingly complex and stressful, and mental health claims with a work conflict or work stress component are becoming even more common. This factor has an impact on increasing the number of mental health claims in both countries, and it is anticipated that this trend will likely continue.

Developing a solid relationship with claimants early is the key to managing any disability claim – this is even more critical when faced with a claimant suffering from a debilitating mental health condition.

While cultural and regulatory differences between the two countries may account, in part, for some of the differences in how successfully claimants are reintegrated back into the workforce, it appears clear that U.S. disability insurers may need to consider allocating more resources to RTW strategies and vocational rehabilitation services if they want to realize the outcomes of Canadian insurers.


References   

  1. Active Claims (as defined in the RGA Group Disability Claims Management Benchmarking Survey) – Disability claims that have been approved and are being actively managed. “Active claims” does not include mature claims, nor does it include claims that have already been denied and/or closed.
  2. https://www.psychologytoday.com/blog/nurturing-self-compassion/201705/the-catastrophic-effects-mental-health-stigma

RGA Group Insurance Insight is published by the Group Reinsurance Teams of RGA Reinsurance. This publication’s mission is to provide news and information to group insurance professionals and to support the group insurance market. The information contained in the articles represents the opinion of the authors and does not necessarily imply or represent the position of the editors or RGA Reinsurance Company. Articles are not intended to provide legal, consulting or any other form of advice. Any legal or other questions you have regarding your business should be referred to your attorney or other appropriate advisor.

Copyright ©2018 RGA Reinsurance Company. All rights reserved. No portion of this publication may be reproduced without permission from the publisher.

 

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The Author

  • Kari Briscoe
    Director, Claims Consulting
    U.S. Group Reinsurance

Summary

What fuels group disability claims? RGA's latest group insurance survey reveals intriguing contrasts between Canada and U.S. markets. Download it here

Canada and US disability claims survey
Download "Disability Claims Infographic"
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