Disability claims due to mental health issues on the rise

On its website, Employment and Social Development Canada cites a 2011 study that finds that 30 per cent of disability claims stem from mental health issues. One in five Canadians experiences such problems each year, the federal agency says, quoting another study conducted from 2011 to 2014. This study calculates the total cost of mental health problems at $50 billion per year in Canada. 

The situation seems to be worsening. “By age 40, about 50 per cent of the population will have or have had a mental illness,” says a brochure released on July 19, 2021 by the Canadian Mental Health Association. The direct cost of mental illness on the Canadian health and social services system has been estimated at $79.9 billion for 2021, it adds. 

Launched in April 2020, LifeWorks’ Mental Health Index tracks trends in Canadians’ mental health since the start of the pandemic. The benefits consultant’s February 2022 report on the MHI confirms that the population’s mental health remains fragile two years into the pandemic.

At -10.6, the February MHI score was the 23rd negative score in a row, compared with the pre-2020 score set at 0. The February score represents a slight improvement over the -11.3 score recorded in January 2022. However, it reflects the mood before the onset of the sixth wave driven by the Omicron BA.2 sub-variant. The MHI score for March 2022 had not been published by press time.

LifeWorks spokesperson Josée St-Pierre told Insurance Portal that the company will continue to publish its Mental Health Index “even after the pandemic is over,” adding that “for our company, it is critical that conversations about this topic continue beyond the pandemic, and our Mental Health Index report is a key part of those conversations.” 

Disability implications 

In a previous interview about access to care on digital platforms, Green Shield Canada President and CEO Zahid Salman cited a Mental Health Commission of Canada study that found that two out of three people with the condition do not seek care. Why? “Because of the stigma, because they don't know where to get the care or whether it's available or not, so they are stuck,” Salman explains.

According to another Mental Health Commission of Canada statistic cited by Salman, two-thirds of disability claims are triggered by a mental health problem or another problem for which mental health is a secondary issue. 

Sources contacted by Insurance Journal as part of its disability insurance feature article say that claims directly linked to a mental health condition have increased recently.

This pandemic-driven growth comes as no surprise to Brian Loewen, Vice-president, Non-participating Insurance Solutions at Canada Life. “The number of claims has gone up, and their duration was extended a bit,” he says.

Each month, Loewen looks at monthly claim terminations, an indicator of the duration of disability leave. This number has been lower than he expected. The lower the number of claims terminations, the higher the number of continuing claims, implying a longer duration. “Everything went a little bit bad for disability claims during COVID-19, but it’s all kind of come back to normal levels now,” says Loewen. 

Mental health disability claims have increased the most, Loewen notes. “Whenever we see an economic downturn, people may be sick and still working. Then it just pushes them over the edge, and it’s a little bit harder to get back to work.” In contrast, the number of cancer-related claims did not move much during COVID-19, he notes.

At Humania Assurance, Nathalia Wosik noticed a decline in the total number of new individual and group disability claims in 2020 and 2021, compared with 2019. As Director, Claims Services, Wosik is responsible for individual disability insurance underwriting and individual and group disability insurance claims.

In 2020, the number of disability claims at Humania plunged to a record low. “People were less active in those two years,” the director explains. They went on fewer adventures and had fewer accidents.” People were also seeing their doctors less often. As a result, there were fewer exams, screening tests and work stoppages, she adds. 

The last two years have also sparked questioning, Nathalia Wosik says. “From month to month, people didn’t know what would happen. Economic uncertainty was a real issue. That probably had an impact on the number of disabilities. People wanted to stay employed. We are at full employment since the end of 2021 and there’s an economic recovery. That’s also helping to keep the disability numbers lower than what we were seeing pre-pandemic.” 

Even so, in 2020 and 2021, new disability claims related to a mental health diagnosis outpaced those related to a musculoskeletal diagnosis, Wosik continues. In fact, psychological factors accounted for 30 per cent of all new claims. “The impact of COVID-19 on the psychological and social component is reflected in the type of disability reported,” she says. 

However, the duration of these disabilities was shorter at Humania, Nathalia Wosik confirms. She analyzed current disability leaves, rather than new disability claims. Mental health-related disabilities made up 28 percent of all ongoing disabilities in 2019, compared with 26 percent in 2021. During the same period, musculoskeletal-related disabilities in progress increased from 27 per cent to 31 per cent of the total. 

“Even though there are more people with mental health problems, those with musculoskeletal problems find it harder to return to work,” Wosik says. This difference stems from the fact that Humania Insurance developed expertise in supporting people with mental health issues, and quickly moved into virtual mental health care when the pandemic began, she explains.

Physical problems are more challenging to address, she continues. “We believe that the difficulty in accessing care such as physiotherapy has had an impact on the percentage of ongoing disability for musculoskeletal problems.” 

Philippe Cleary does not see an increase in the number of individual disability insurance claims at iA Financial Group. “There are even fewer claims for certain causes of disability,” iA’s Director, Actuarial Services, Individual Insurance, Savings and Retirement points out.

Accidents have declined since the pandemic began, yet disabilities related to mental health and substance abuse have increased, Cleary says, adding that the duration of disabilities has generally lengthened in the last two years. “It takes longer to receive surgical treatment, for example. People are also waiting longer to receive paramedical treatments,” he points out. 

Long COVID on insurers’ radar 

Philippe Cleary agrees that 2020 and 2021 were not stellar years in terms of individual disability insurance experience. However, he is hesitant to adjust product pricing in response to what he describes as volatility in results. “The last two years have been particular years, with particular experience,” Cleary says. The trend toward longer disability leave may or may not linger after the pandemic, he adds.

Among the factors that may affect the pricing of disability insurance products, Cleary says that long COVID and treatment delays are the big unknowns. No one knows how these factors will affect the bottom line, in the short and long term. 

“Long COVID is one of the things we’re watching,” says Nathalia Wosik. She believes that the industry can only speculate about this condition for now, and about the impact of postponing surgery and other health care and the economic hardship caused by inflation. “The World Health Organization (WHO) was talking about a wave of long COVID, but we haven’t seen it so far,” she adds.