2011 ALUCA TurksLegal Scholarship
2nd Runner up
Managing group disability income claims Tim Hulme | CommInsure
Growing and expanding market share in the Group Insurance space is currently a priority for many Insurers. Despite strong interest in this area, traditionally these claims have been a little more difficult to manage when compared to the management of Individual Disability Income claims. Comment on whether you agree/disagree with this statement and explore the factors which hinder and/or help the claims management process with this product. Provide your opinion as to how to effectively manage group claims to achieve a positive outcome for all parties concerned including: the member; employer; fund; insurer and the reinsurer.
Group Income Protection claims have historically proven difficult to manage. However, these claims also represent the greatest opportunity for improved case management. When an integrated approach is achieved between the employer, the intermediaries, and the insurer’s claims management team, these claims can be easier to manage than Retail Income Protection claims where there is a limited opportunity to have an established relationship with the claimant’s employer.
Factors which help the claims management process for Group Income Protection Potentially numerous factors can improve the claims management process for Group Income Protections claims.
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These include: 1. The majority of claimants are still employed at the time of the claim being notified. This greatly improves the chances of being able to implement a graduated return to work plan. People who are self-employed hold approximately 70% of Retail Income Protection policies. For them at claims time a graduated return to work is more difficult to arrange, as there are less duties available in a small (or one person) business. As a larger employer has the opportunity to provide a larger range of suitable duties, the claimant has more options to perform alternative work as their recovery progresses.
2. Larger employers typically have existing return to work policies and procedures (often developed under their worker’s compensation policy) and the income protection claimant can be accommodated through the same policy and procedures. This means the claimant is less at risk of relapse or re-injury, than the self-employed claimant, when attempting to return to work. Therefore the return to work can be attempted earlier in the Group Income Protection claimant’s recovery.
3. There are greater opportunities for early intervention for Group Income Protections claims. For employees under Group Income Protection scheme, the employer is aware of their absence from work from the first day of sick leave. This provides the opportunity for early intervention for the employer and the insurer1. I will outline the details for best practice for early invention later in the paper.
Factors which hinder the claims management process for Group Income Protection 1. Delays in the initial claims process are often created by longer waiting periods. If the claim is received at the end of the 3 month waiting period, and no rehabilitation or return to work intervention has been attempted at this point, the claim duration will be more difficult to manage.
2. The involvement of multiple parties, creating multiple lines of communication, each with the potential to delay possible claims interventions can also be a hindrance to the claims management process. Again, best practice will be described later in the paper
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3. Human Resources managers can be less interested in managing employee absence once an income protection claim has been made, as they perceive less financial incentive for their organization, than managing an employee who has a Worker’s Compensation claim. Again this can lead to extensive delays in providing a direction on what return to work options are available for the claimant.
4. The Group Income Protection claimant has less at stake than a self-employed Retail Income Protection claimant. The self-employed person often has financial commitments in the business and needs to return to work to keep the business trading, even returning to work before their doctor suggests is medically appropriate. For the employee under a Group Income Protection scheme there is often less of a sense of urgency as there is less a stake for them, provided they are not at risk of losing their job. This is a further reason for early intervention, as the Group Income Protection claimant will need to be focused as early as possible about their return to work plans.
Effective management of Group Income Protection claims to achieve a positive outcome for all parties. Determining an Agreed Process between Employer and Insurer Those who have experience working in the worker’s compensation arena will be familiar with the well documented claims and return to work process in place between the employer (through their Human Resources Department) and the Worker’s Compensation insurer. This is often driven by necessity as the employer’s annual Worker’s Compensation premiums can often run into seven figures and claims experience is heavily weighted in the calculations of this premium. My experience with working with the employers who hold Group Income Protection policies is that a documented and effective return to work process is less likely to be in place for Group Income Protections claims. When the employer or Human Resources manager understands that there are resources available from the Group Income Protection insurer to assist with absence management, and a referral for rehabilitation can be engaged as soon as the period of absence reaches an agreed duration, then the chances of a successful claims outcome are greatly improved. A best practice model for claims management needs to be established, ideally at the time the employer commences on risk with the Group Income Protection insurer. This model needs to be tailored to the employer’s needs, based on their own internal Human Resources capability. The model needs to address:
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1. Sharing of background information of the claimant’s situation. Because the employer, or Human Resources manager, is often aware of any background issues or psycho-social factors that are affecting the claimant’s motivation to return to work, the chances of quickly being able to provide appropriate claims intervention or rehabilitation intervention are greatly improved. This information is of vital importance to the claims teams for the Group Income Protection insurer.
2. Co-ordination between the insurer and the employer regarding the choice of rehabilitation provider. The employer is often best placed to allocate any referrals to external rehabilitation providers that they currently have engaged for other employees, rather those from the insurer’s rehabilitation provider panel, as those external rehabilitation providers are familiar with the employer’s business given their experience with previous Worker’s Compensation claims. The rehabilitation provider will therefore have a better understanding of what is required to achieve a return to work outcome in that employer’s business.
This type of approach is more likely to be successfully implemented with Corporate Income Protection policies where a direct relationship with the insurer exists. When the relationship is via a Master Trust or Industry Fund there are more challenges in establishing these arrangements, however these outcomes are still achievable.
Financial Incentives for Employers to assist in the claims management process It is important for the employer to have financial incentives for participating in the management Group Income Protection claims. If the same premium weighting is given to Group Income Protection claims, as are Worker’s Compensation claims, then Group Income Protection claims will be managed with the same priority as Worker’s Compensation claims. Anecdotally employers have been known to block return to work plans for employees with a Group Income Protection claim because having the employee back at work might increase their risk of a Worker’s Compensation claim. The employee then remains on higher monthly benefits, and for a longer potential claim duration, than would be available under the potential Worker’s Compensation claim. This decision makes financial sense for the employer, because claims experience under Worker’s Compensation is more heavily weighted into premiums than for Group Income Protection premiums. However there is an obvious opportunity for Group Income Protection claims to be given a higher financial priority for employers, given the total dollar liability for the Group Income Protection claim is often higher. Should claims experience for Group Income Protection premiums be given a similar weighting to premium calculation for Claims Experience for Worker’s Compensation, employers would then be able to justify better resourcing of Human Resources departments to manage Group Income Protection claims.
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In turn Group Income Protection claims experience would improve, return to work rates for injured workers would increase, and Group Income Protection premiums would reduce over time. Legal and General in the UK have recently published their success at improving their claims experience by providing the employer with a financial incentive for notifying them of when an employee has been absent for 6 weeks: “In 2009 Legal & General saw 54% of individuals able to return to work within the first six months of absence, compared to 50% in 2008. When notified of the absence within six weeks, the return to work rates climbed to 67% compared to 49% when notified later. The figures highlight the importance of early notification and reinforce the idea that six weeks is a tipping point in helping people get back to work. Early notification enables Legal & General to provide appropriate specialist treatment and support to help the individual back to work. “These figures further show that early intervention can help employers and employees.”2 These types of financial incentives for employers improve the chance of Group Income Protection claims being managed effectively in the context of the employer’s busy Human Resources department. The reality is that claimants with Group Income claims compete with claimants under Worker’s Compensation for the availability of suitable duties in the workplace when they are returning to work, and currently Income Protections are too often placed as a second priority. To achieve a better outcome for all parties, Group Income Protection claims need to be on a level playing field with Worker’s Compensation claims in terms of financial liability for the employer.
Funding for Early Intervention Rehabilitation Early invention is key to the success of rehabilitation interventions3. Yet employers and insurers are not taking full advantage of funding that recently became available for early intervention rehabilitation. The recent change in the Federal Government funding provides an important positive step in helping manage Group Income Protection claims for the benefit of the member, employer, fund and insurer. The “Job in Jeopardy” program funded through Department of Education, Employment and Workplace Relations (DEEWR) provides funding for rehabilitation for employee’s who are at risk of losing their jobs. DEEWR described the program as: “Job in Jeopardy assistance (also known as employment in jeopardy) is immediate support to help employees who are likely to lose their job as a result of their disability, illness or injury. It is available through the Disability Employment Services. An employee or employer may approach your service directly for job in jeopardy assistance.”4
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DEEWR have developed this program in recognition of the benefits of early intervention by assisting people with illness or injury to remain in their current employment. The program is available for insurers, employers, or intermediaries to arrange a referral as soon as the employee is absent from work due to illness or injury. One national rehabilitation provider5 describes the services available through Job in Jeopardy as: • “One on one assessment” •
“Implementation of an individualised plan to address identified barriers”
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“Employer education, equipment, exercise support”
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“Allied health support services e.g. - counselling, worksite assessments, assistive sustainable employment.”
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“Collaborative interaction with other service providers to achieve sustainable employment”
This scheme is available through most large national rehabilitation providers. For employers and insurers this removes any concerns around costs of early intervention. The use of this scheme can be built into the initial claims management process for employer, intermediaries, and insurer. A review of this scheme conducted by NOVA Public Policy in 2008 found that “many employment service providers, employers and employees are unaware of the support that can be provided through Job in Jeopardy assistance and intermittent support as part of the suite of services provided by Disability Employment Network or Vocational Rehabilitation Services providers.” “Employers that participated in the research were unaware of the support available through Job in Jeopardy assistance and intermittent support assistance. However, once they became aware of the support through this project, they were keen to receive communication about these and other Disability Employment Network and Vocational Rehabilitation Services provider supports generally.”6 Potentially a role that insurer’s can play is to inform employers of the support available through the Job in Jeopardy scheme for their employees who have commenced a period of absence due to illness or injury and may lodge a Group Income Protection claim.
Conclusion Currently there are a number of factors that hinder the management of Group Income Protection claims. However, significant opportunities exist for improved case management by achieving an agreed process between employer and insurer for claims management, providing financial incentives for employers to assist in the claims management process, and accessing funding for early intervention rehabilitation.
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Endnotes 1. Burton T, Beam, John, McFadden (2001) Employee Benefits. Dearborn. Trade Publishing 2. Buckley,D (2011): Legal & general show back to work rates boosted by early intervention. Legal & General Media Centre. 3. Burton T, Beam, John, McFadden (2001) Employee Benefits. Dearborn. Trade Publishing 4. Department of Employment and Workplace Relations (2011): http://www.jobaccess.gov.au/ ServiceProviders/Assisting_job_seekers/Helping_job_seekers_thrive_at_work/Helping_job_ seekers_keep_their_job/Pages/home.aspx 5. Occupational Rehabilitation Services (2011): http://www.orsgroup.com.au/attachments/article/55/ Patients%20Job%20at%20Risk%20Poster.pdf 6. Nova Public Policy (2008): Promoting best practice use of job in jeopardy assistance and intermittent support.
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