Is disability insurance more important now than ever before?
And should you add disability to your global EB programme?
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What makes something a disability? This is a question that has been asked a lot in the last few years, with many people coming out of the pandemic facing the challenge of long COVID. Long COVID (when symptoms last or develop three months after infection from COVID-19) affected more than 17 million people in the World Health Organization’s European Region of 53 countries in 2020 and 2021.1
With so many people experiencing long-term, sometimes debilitating, symptoms, governments, insurers and employers are having to make a judgement call as to whether this new condition is considered a disability. In the UK in September 2021, long COVID was defined as such after an employment tribunal ruled that it should be protected under the UK’s Equality Act 2010.2
With long COVID bringing much greater awareness to the subject of disability, plus delays in treatment for chronic conditions and increases in mental health and musculoskeletal conditions because of the pandemic, it could be argued that disability (and in particular disability benefits) is a subject of growing importance for multinational employers all over the world.
According to the US Social Security Administration in December 2022, just over one in four of today’s 20-year-olds will become disabled before they retire,3 so this is an issue that will become a lot more relevant to us than we might currently assume!
But before diving deeper into this discussion, looking at why the statistic above is so high, why disability insurance is so important, how multinationals can mitigate disability claims and the impact of disability on global programmes, it’s important to go back to basics and look at what constitutes disability insurance.
What is disability insurance?
Simply put, disability insurance is used to cover (or partially cover) someone who isn’t able to work due to illness or injury. This helps the insured person to pay for essential expenses like food, mortgage/rent payments, energy bills etc.4
The insurance cover can either be paid as a lump sum (a one-off payment) or annuitised (monthly payments). Payment terms will often depend on whether the policy covers short or long-term disability, or is a critical illness claim.
Focusing specifically on STD and LTD, these benefits are paid to employees who are unable to work because of their disability. Depending on policy terms and conditions, there will be different criteria – often referred to as the “definition of disability” – that define the types of disability someone could receive and whether or not they qualify. This can be quite complex and uses a number of different acronyms, so we’ve tried to summarise this in the glossary below.
Disability glossary
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Is disability insurance more important now than ever?
This is a question without an absolute answer, but there’s a compelling case to be made that it has never been more important, both for individuals and for multinational employers.
But why? According to the World Bank, one billion people, or 15% of the world’s population, experience some form of disability, with disability prevalence being higher in developing countries.10
And despite advancements in healthcare and technology, particularly in “first world” countries, rates of disability remain similar to those of nearly 40 years ago. For example, we mentioned at the start of this article that in the US, nearly one in four (24%) 20-year-olds will become disabled before they retire. This has only marginally declined from 28% in 1986.3
One reason for this rate remaining so high despite medical advancements could be the impact of chronic/non-communicable diseases. Sometimes called “lifestyle diseases”, these are the conditions that are either caused or made worse by peoples’ behaviour. For example, a lack of exercise and sedentary lifestyles are linked to people gaining weight or being obese. And obesity is closely linked to diseases like diabetes, cancers and circulatory system diseases (heart attacks, strokes etc).
Inactivity, sitting at a desk, and being overweight can also contribute to a rise in musculoskeletal conditions. Back and spine, knee, hip and shoulder issues rank highly as some of the top drivers of disability.11
There’s also mental health to consider. Going back even a decade or two, in many countries and regions, mental health was a taboo subject. While there are still countries where this is the case, the trend is definitely moving towards a culture of understanding. Particularly in the light of the pandemic, where many struggled with lockdowns, isolation and losing loved ones (to give but a few examples).
The improving understanding and perception of mental illness is positive, but it could lead to an increase in short and long-term disability claims, as patients feel more comfortable speaking to their doctors and employers about the mental health challenges they are facing and acknowledge the limitations resulting from those.
And, of course, the pandemic also brought us the challenge of long-COVID. As we’ve already discussed, those suffering the lasting impacts of the virus could potentially increase the need for disability insurance.
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Ideas to protect your people and mitigate disability risks
With such large numbers of workers at risk of suffering a disability at some point during their work-life, and the growing concern of chronic illness, mental health and long-COVID, employers are increasingly asking about disability.
Nicola Fordham, Chief Underwriting Officer at MAXIS GBN said “Employers all over the world understand that they have a duty of care towards their people and are looking at the best way to protect them should they go through the traumatic experience of being unable to work due to an illness or injury. By providing short-term and long-term disability and critical illness cover, employers can ensure their people are protected financially should this happen.
“Although nowhere near as many claims as for medical, we still see an impactful number of claims for disability each year. To give a rough indication of claims frequency for disability products, our network member, MetLife US, will typically see 60 claims per 1,000 covered lives for STD with a waiting period of seven days and three claims per 1,000 covered lives for LTD with a waiting period of six months.”
“These people away from their job for some significant periods of time, so there are business benefits too. Including STD and LTD in an EB programme could be a real differentiator in the war for talent and might help businesses to attract the best workers ahead of their competitors as well as ensuring that their people are fully supported when they are suffering and then able to return back to work. Lots of multinationals we speak to are looking to set a minimum standard of benefits globally and, given differing local market practices and state disability coverage, providing disability cover could help to achieve that.”
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So, with disability concerns on the rise, are there ways employers can mitigate the risks, lower costs and help their people stay healthy? Here are a few ideas…
Be flexible
The demand for flexible working has increased significantly in recent years – particularly since the pandemic – as employees look to balance their work and personal lives. And employers have responded. The rise in flexible, hybrid and fully-remote roles is proving that the rigid Monday-Friday, 9-5, is a thing of the past.
The good news is that this could have a positive impact for your people that suffer from a disability. By making allowances for employees who need to adapt their schedules and work remotely, or even part-time, could help your people to return to work more quickly than before.
In many markets there’ll be requirements for employers to make reasonable occupational health adjustments for returning employees anyway, but by also having a strong flexible working policy, you can take this further and offer their people the freedom they need to come back to work in a way that suits them, making them more likely to do so.
Act early to ease the return-to-work burden
Insurance providers are experts when it comes to helping employees return to work and minimising the length of their absences with care and case management support. Often local insurers will have programmes that are tailored to support those who have had an accident or are ill and will be able to support the person directly, with expert advice and support throughout the recovery journey.
And the sooner you work with them and start these programmes, the better for everyone involved. It’s much more beneficial for your employee to start recovery support as soon as is practical instead of waiting for the elimination period to be over and claims to begin. Acting early could not only help the person recover more quickly but could also help them return to work sooner – it’s really a win-win situation!
Focus on wellness
It might sound obvious, but a focus on wellness is crucial. With many of the biggest causes of disability being lifestyle related, building a culture of wellness in your organisation could be key. Running education campaigns about the risk factors and lifestyle decisions that cause particular diseases could help your people make better choices about their health.
Digital wellness services, musculoskeletal programmes, ergonomic equipment and setups, and activity challenges are just a few ways you could help improve the overall health and wellbeing of your employee population.
By looking at medical and disability claims data from your global EB programme, you can begin to identify the biggest cost drivers and risk factors in each market and put in place services and solutions to tackle these specifically. Proactive wellness is the ultimate early intervention for disability.
Provide mental health support
Having an easy-to-use, widely available mental health support programme in place is also vital, not only for minimising your disability claims but also for having a happy, productive workforce. Employee assistance programmes (EAPs) or tele-mental health services are great ways of providing easy access to mental health treatment.
And equally as important is building a culture of openness where an employee feels comfortable talking about mental health generally or their own specifically. Training mental health first aiders, equipping people managers to have conversations about mental health, and removing an “always-on” culture are just a few steps you can take in this area.
Disability and global programmes
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Are disability risks suitable to be written as part of a wider global EB programme (like a captive or pool)?
Nicola Fordham says yes but also urges caution. “Long-tail benefits like LTD and STD can be good candidates to be written in a global pool or via a captive. As these benefits pay out over multiple years, they provide cash flow stability and losses are easier to predict than other lines of risk.
“But employers need to be careful and judge each policy before adding it to a global programme as there can be a large impact when reserves are established and the programme needs to be able to sustain this. For example, if a big LTD policy in one country is going to make up a large chunk of a pool, it might be difficult to balance the programme and write it profitably. The team of underwriters at MAXIS look at things like this for our multinational clients and help them to decide which policies would be best suited to be added to a pool or underwritten via a captive.”
With long COVID, a rise in chronic conditions and renewed focus on mental health, disability insurance is very much in the spotlight. While it’s impossible to conclude that disability cover is more important now than in the past, we think it is safe to say it’s something employers should be considering including in their EB programmes.
Multinationals who want to care for their employees and keep their disability claims down should assess whether they’re offering the best wellness services to keep their people happy and healthy, the most appropriate disability cover to help them financially at a time of need and the right return to work programmes to help them get back to some form of normality as soon as possible.
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[1] Anon, World Health Organization https://www.who.int/europe/news/item/13-09-2022-at-least-17-million-people-in-the-who-european-region-experienced-long-covid-in-the-first-two-years-of-the-pandemic--millions-may-have-to-live-with-it-for-years-to-come (Sourced March 2023)
[2] Katie Nadworny, Society for Human Resource Management (SHRM) https://www.shrm.org/resourcesandtools/hr-topics/global-hr/pages/uk-long-covid-19-disability.aspx (Sourced March 2023)
[3] Anon, United States Social Security Administration, https://www.ssa.gov/oact/NOTES/ran6/index.html (Sourced March 2023)
[4] Jessica Moser, MetLife https://www.metlife.com/stories/accident-health/do-i-really-need-disability-insurance/ (Sourced March 2023)
[5] Anon, Guardian Life https://www.guardianlife.com/disability-insurance/long-term-vs-short-term (sourced March 2023)
[6] Anon, MetLife UK https://www.metlife.co.uk/intermediary/employee-benefits/knowledge-expertise/metlife-academy/product-insight/what-is-group-critical-illness-cover/ (Sourced March 2023)
[7] Anon, Insuranceopedia https://www.insuranceopedia.com/definition/3420/permanent-partial-disability (Sourced March 2023)
[8] Anon, Insuranceopedia https://www.insuranceopedia.com/definition/1586/temporary-total-disability (Sourced March 2023)
[9] Anon, Lawyer Monthly https://www.lawyer-monthly.com/2022/10/consider-these-7-factors-for-successful-total-permanent-disability-tpd-claims/ (Sourced March 2023)
[10] Anon, The World Bank https://www.worldbank.org/en/topic/disability (Sourced March 2023)
[11] Anon, Council for Disability Awareness https://disabilitycanhappen.org/disability-statistic/ (Sourced March 2023)
This document has been prepared by MAXIS GBN and is for informational purposes only – it does not constitute advice. MAXIS GBN has made every effort to ensure that the information contained in this document has been obtained from reliable sources but cannot guarantee accuracy or completeness. The information contained in this document may be subject to change at any time without notice. Any reliance you place on this information is therefore strictly at your own risk.
The MAXIS Global Benefits Network (“Network”) is a network of locally licensed MAXIS member insurance companies (“Members”) founded by AXA France Vie, Paris, France (“AXA”) and Metropolitan Life Insurance Company, New York, NY (“MLIC”). MAXIS GBN, a Private Limited Company with a share capital of €4,650,000, registered with ORIAS under number 16000513, and with its registered office at 313, Terrasses de l’Arche – 92727 Nanterre Cedex, France, is an insurance and reinsurance intermediary that promotes the Network. MAXIS GBN is jointly owned by affiliates of AXA and MLIC and does not issue policies or provide insurance; such activities are carried out by the Members. MAXIS GBN operates in the UK through its UK establishment with its registered address at 1st Floor, The Monument Building, 11 Monument Street, London EC3R 8AF, Establishment Number BR018216 and in other European countries on a services basis. MAXIS GBN operates in the U.S. through MAXIS Insurance Brokerage Services, Inc., with its registered office located at c/o Katten Muchin Rosenman LLP, 50 Rockefeller Plaza, New York, NY, 10020-1605, a NY licensed insurance broker. MLIC is the only Member licensed to transact insurance business in NY. The other Members are not licensed or authorised to do business in NY and the policies and contracts they issue have not been approved by the NY Superintendent of Financial Services, are not protected by the NY state guaranty fund, and are not subject to all of the laws of NY. MAR01204/0423