Cape Town - Pressure in the group disability market has increased to the point where it’s no exaggeration to say that the industry is on the edge of a cliff, according to Sandy Govender (head of group insurance at MMI Holdings) and Regard Budler (managing executive of the corporate segment and distribution).
To them the big question is how to turn around the trend to create a long term future for valuable benefits that drive the financial wellness of employees.
"In a struggling economy employees tend to go onto, and stay longer on, disability as the prospects of a return to work are lower. And the recent change to make employer-sponsored disability benefits tax-free has created a further unsustainable load of employees remaining on disability," explained Govender and Budler.
"The current price of group disability insurance still reflects favourable historical claim experiences as well the impact of competitive price-cutting behaviour by insurers. However, the best view of the long term sustainable cost is well above current pricing levels, especially in the absence of holistic risk management and behaviour-changing interventions by employers and insurance providers."
Their research shows a clear link between the macro-economic environment and the disability claims experience. With the wide expectation that the economy will continue with its lacklustre growth for some time to come we expect that, without significant action, the disability claims experience is only likely to get worse or, at the very least, to not improve substantially, in their view.
Another looming problem