Disability used as smokescreen to cut staff in tough times

Despite repeated sightings of green shoots all evidence suggests that we can expect a period of ongoing economic challenges both nationally and globally.And“in tough times insurers anticipate a significant increase in the number of disability claims submitted” says Selwyn Kahlberg, Managing Director, Alexander Forbes Life Limited.

This is because to maintain margins, or simply to survive, employers that carry disability insurance areoften forced to reduce expenses by restructuring or reducing the workforce. In these conditions “it is not uncommon for employers to identify employees who might validly qualify for disability claims, shifting the expense from the employer to the insurer” explains Kahlberg.

Benevolent-minded employers may well have employees who are impaired or partially disabled, but are performing at an acceptable level. When times are tough, however, employers are forced to make difficult decisions and disabled employees are often the first to be considered in a down-sizing exercise.In some cases “employers willeven seek to place people who would not ordinarily qualify as disability claimants on disability, saving themselves the costs associated with retrenchment” says Kahlberg.

Cutting numbers also leaves the remaining employees with more work often leading to a higher incidence of stress-related claims.

The global economic recession of the early 1990’s together with other factors, gave rise to a significant increase in disability claims submitted - and paid out. That increase in claims ultimately gave rise to an increase in premiums.In recent years disability premiums have reduced significantly. “The chances of this trend reversing itself in the current economic environment is a distinct possibility” predicts Kahlberg.

Whilst it is the insurer’s obligation and duty to pay valid claims, it is beneficial to the wider client and employee base to ensure that only valid claims are paid and that premium levels are maintained at the right levels.

In hind-sight, many of the claims submitted in the 1990’s should not have been accepted. In response, insurers enhanced their claims assessment procedures to filter out the kind of opportunistic claims that are to be expected in tough times - by investing in better trained claims assessors able to advise claimants on disability and manage disability claims appropriately.

As such, these days, “assessors take a broader range of factors into consideration during their assessment process, such as the industry that the company operates in, the extent of retrenchments as well as whether there are any performance issues in the workplace” says Kahlberg.

Furthermore, nowadays, more attention is paid to a person’s actual ability to perform their job as opposed to making a standard decision based on their medical diagnosis. This is because, increasingly, the definition of disability is related to a person’s functional ability to perform.

In addition, claims departments now include highly skilled, medically qualified, personnel who are able to accurately asses the medical information submitted by the claimants’ doctors.

In the meantime it is hoped that the measures implemented by insurers to tighten up the claims process will result in “stable premiums providing financial protection to those who validly qualify for benefits” concludes Kahlberg.