New income insurance product aims to cover temporary incapacity
- Johnny Johnson
Advanced Incapacity Management Solutions (AIM Solutions) has launched a short-term insurance product, underwritten by Lion of Africa Insurance, which provides employee income insurance for temporary incapacity for a period of 12 months. This product is unique in that it is designed to manage claims rather than increase premiums.
Johnny Johnson, CEO of Aim Solutions, explains the rationale behind the new product:
“In general the risk management processes to cover disability insurance risks have improved over the years. Since the poor claims experience of the 1990s, most insurers have improved their claims assessment controls with specialists undertaking detailed assessments of certain disability claims. These processes have been designed to limit claims and attempt to return existing claimants to the workplace and so reduce the claims cost.”
“Unfortunately, very little has been introduced to the market which provides for risk management processes prior to claims stage.”
“If you look at the current position in the disability insurance industry, the policyholder can’t be rewarded with lower premiums for introducing risk management interventions such as alarm systems, armed response, vehicle tracker devices because no such risk management tools exist in this industry. The disability insurance industry has been stagnant for a while and it may be necessary to introduce some new thinking in the industry.”
“With this product, the risk management interventions before claims include the appointment of a specialist incapacity manager for each client to work with both employer and the incapacitated employee to manage the incapacity. This involves counselling-affected employees; training managers to work with incapacitated employees; identifying curable diseases, which will help the employee get back to work; and aiding in the application of permanent disability insurance, if necessary. The process is strictly confidential and keeps the costs of premiums down by reducing the number and period of claims.”
He adds that the process involves identifying employees who, by their extended absenteeism, are at risk of losing their jobs because of incapacity.
“Our cover begins when the Basic Conditions of Employment Act sick leave benefits have been exhausted. We cover up to 75% of the employee’s monthly income for a period not exceeding 12 months. During this time, our specialist manager counsels both the employee and employer and discusses options for the employee’s health and future work prospects. If they can be cured, we guide them and the employer in this process. If they become disabled and unable to fulfil their duties, we then help them with the claim process for any other disability income insurance they may have available.”
“The disability industry is small, with an approximate annual premium income of R10 billion (long term and short term), in comparison with the life industry with annual premiums exceeding R140 billion. However, this sizeable gap may change over time given the higher growth seen in the disability insurance market."
Johnson notes that the industry needs to move to a position where schemes are rewarded for making an effort to reduce risk. The current economic downturn has not yet had a major impact on claims experience. Usually, following an economic downswing, the claims experience worsens; however, this has not occurred as yet.
“If insurers wish to maintain a profitable disability insurance business then they will need to make necessary changes in their risk management model in order to remain competitive,” he adds.
Author: Johnny Johnson is the CEO of Advanced Incapacity Management Solutions.
