Yahoo Finance Long-term disability claims to fall due to slowing economy, says RBC
A slowing economy and a decrease in long-term disability (LTD) claims go hand in hand, says the Royal Bank of Canada (RY).
“The RBC Insurance Group LTD forecast predicts a 3.6 per cent decrease in LTD incidence rates in 2019 relative to 2018 due to a forecasted deceleration in GDP,” said John Carinci, VP of operations and client experience at RBC Insurance, in a research note.
“While still elevated on an overall basis, 2019 nonetheless marks a directional shift after two consecutive years of growth.”
RBC used a propriety algorithm to discover the link. Its forecasts came very close to actual long-term disability rates in 2017 and 2018.
The trend can be attributed to employee attitudes during an economic downturn. Concern about job security and performance sets in so they’re more likely to work through their pain. When things pick up, they are more willing to take off.
Employers should be cautious though because RBC warns pent up stress and anxiety can make employees more likely to succumb to illness and take time away from work.
When it comes to the economy, RBC expects Alberta to continue to struggle this year. It blames government mandated production cuts due to transportation bottlenecks and refinery shutdowns. In its most recent outlook, RBC shaved Alberta’s economic growth forecast by about 1 percentage point to 1.5 per cent in 2019.
National GDP growth was lowered by about by 0.1 to 0.2 percentage points to 1.7 per cent. RBC says this level means Canada’s economy is “running just shy of its potential.”
The International Monetary Fund went one step further today, by cutting its forecast by four-tenths of a percentage point to 1.5 per cent. It sees a rebound.
Canada’s economy grew 1.8 per cent in 2018 and 3.0 per cent in 2017.
Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains
Download the Yahoo Finance app, available for Apple and Android.