How can a hybrid disability program change benefits?

Scott Knight, VP distribution of group benefits at Wawanesa Life shares the benefits of the group's newly launched hybrid disability program

How can a hybrid disability program change benefits?
Scott Knight, VP distribution of group benefits at Wawanesa Life

“Hybrid” is a term that most people are familiar with by now. Over the last several years, more and more hybrid options have become available for the workplace. This is certainly true for employee benefits as one Canadian insurer has launched a hybrid differentiator for disability benefits.

Wawanesa Mutual Insurance Company, which is the parent company of the Wawanesa Life Insurance Company is a Canadian mutual company and one of the largest property and casualty insurers in Canada. Wawanesa Life has launched a Hybrid Disability Program as a benefit for their members. Scott Knight, vice-president of group benefits distribution at Wawanesa explains Wawanesa’s Hybrid Disability program as a combination, or hybrid, of full long-term disability (LTD) during the standard two-year own occupation (or the “change of definition”) period with long durational coverage thereafter for specific covered conditions in the “any occupation” period.

At the end of the two-year own occupation period, the hybrid disability option transitions the definition of disability to 33 defined Covered Conditions contained in Wawanesa’s Accident and Serious Illness Disability Plan (ASID). The reason to launch this program, Knight says, was because of a need in the benefits market.

“Next to health and dental, disability is the most volatile rate or premium,” he said. “Health and dental are probably more transactional than disability. Over the years, I witnessed ever increasing LTD rates in the $6, $9, $13 dollar ranges and the highest was a $23 LTD rate. That's just not affordable or economical. Plan sponsors and members cannot maintain that. That’s why we’re trying to make sure we preserve some long durational coverage for our members in their time of need.”

Knight emphasizes the importance of understanding the distinction between traditional LTD coverage and hybrid insurance, saying it can provide a balance between cost certainty and long-term coverage.

“One of the things that we do when we deploy this as a coverage or a program is make sure that all the parties, specifically the plan sponsor, acknowledge that it’s not traditional long-term disability,” he says. “Traditional LTD is codified in terms of the law going back to the 1990’s. It covers all conditions, accidents and all illnesses.”

Hybrid is traditional LTD through the own occupation period, Knight explains, as it covers all the same standard LTD ailments. “It's at that change of definition, which is typically a two-year benefit into any “occupation period”, where it really shines, when it transitions to that Accident and Serious Illness Disability definition.”

Knight noted that for Wawanesa members to qualify for the hybrid disability coverage, or more specifically, for benefits to continue beyond the initial 2-year own occupation period, they need to be diagnosed with one of 33 defined covered conditions and be disabled from any occupation. Upon acceptance, benefits may continue through to age-65 with the provision of qualifying medical evidence.

Examples of covered conditions under Wawanesa’s Accident and Serious Illness Disability definition include but are not limited to, Alzheimer’s disease, cancer, heart attack or stroke, Parkinson’s, hip or knee replacement surgery and loss of limbs.

Because it's not a standard LTD, there is some price certainty when it comes to the hybrid option, Knight highlighted. “Subjectively, once you start seeing an LTD rate in the $4-$5 range, that's when you might want to start looking at hybrid as an alternate solution.” Typically, from a pricing perspective, Knight added, hybrid falls in around 66 per cent of the cost of standard LTD.

“What we like to do in terms of deployment is we can launch the hybrid or even the Accident and Serious Illness Disability into groups to get some control around the experience, move them through what I call “the disability continuum” and maybe get them back to full long-term disability,” Knight said.

Wawanesa has found that because of the rate stability and rate certainty the company provides for Hybrid, plan sponsors usually decide not to go back to the full LTD option.

“They like that they have full coverage for their members through the own occupation period,” he said. “Additionally, they have long durational coverage. They're seeing those rating or premium peaks and valleys level off. They're not seeing the rate increases that you typically see on traditional LTD. Some plan sponsors will refuse to move back to LTD because of the rate stability and breadth of coverage Hybrid Disability affords.”

Knight believes the Hybrid Disability product’s definition of disability acts as an incentive to people getting better in the first two years where they have full standard LTD coverage. “Members know that they need to be an active participant in the rehabilitation and return to work strategies. At that change of definition post 2-years, benefits may not continue beyond that change, so we have found better member return to work strategies, better member outcomes, better member participation in treatment and rehabilitation because of the overall product,” Knight said.

When asked what makes Wawanesa a differentiator in the benefits space, he points to their intent of providing creative solutions to organizations and to their members.

“To preserve access to long durational disability coverage is paramount and melds well with Wawanesa, as a mutual,” Knight said. “We're stewards of our members’ premium dollars. We have a duty to pay claims fairly, but we also have a duty to make sure that we preserve the viability of coverage for people who haven't made a claim yet and be able to assure them that in their time of need, we are still going to be there.”