Port Elizabeth-based Advanced Incapacity Management Solutions (AIM Solutions) has launched a short term insurance product, underwritten by Lion of Africa Insurance, that provides employee income insurance for temporary incapacity for a period of 12 months. The product differs from other insurance products in that it has been 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 1990’s, 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 as well as attempt to return existing claimants back to the workplace and thereby 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 compare the current position in the disability insurance industry with say the short term insurance industry where the policyholder is rewarded with lower premiums for introducing risk management interventions such as alarm systems, armed response, vehicle tracker devices and such, whereas no such risk management tools have been introduced in the disability insurance market. 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 prior to 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 that 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,” says Johnson.
Johnson says the process involves identifying employees who, by their extended absenteeism, are at risk losing their jobs due to 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 twelve months. During this time our specialist manager counsels both the employee and employer and discusses options in terms of the employee’s health and future work prospects. If they can be rehabilitated and made well, we guide them and the employer in this process. If they become disabled and unable to fulfil their employee duties, we then help them with the claim process for any other disability income insurance which they may have available,” Johnson explains.
“The disability industry is small, at approximate annual premium income of R10 billion (long term and short term), in comparison with the life industry with annual premiums in excess of R140 billion, but this relative size gap may change over time, given the higher growth seen in the disability insurance market.
As such, 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, but it is also known that this impact does lag the economic downswing and worsening claims experience can definitely be expected.
“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.
Contact AIM Solutions.
Alan Straton
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