Are we sicker or just savvier customers?

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Do you think people today are sicker than they used to be just 50 years ago? If not, why are there more of them off work?

Friday, April 17th 2015, 11:54AM 1 Comment

by Russell Hutchinson

I don’t think people are sicker, and yet, there are more people claiming benefits, both state and income protection benefits. A big study for the New Zealand treasury a little while ago was done to look at the same question.

“Little SB (sickness benefit) and IB (invalid’s benefit) growth can be explained by increases in ill-health and disability among the working age population, either overall or due to population ageing” says Michael Fletcher in his December 2009 paper. He produces Ministry of Health data to support that view too.

Although, with so many things, this is complicated to even measure. So much so that the researcher for that paper had three methods: two that Treasury used plus an OECD estimate. But by one method the combined recipients of those benefits are 5% of the working age population whereas the rate was below 1% for the period from 1955 to 1980.

But if we aren’t actually a lot sicker, why are there more people claiming a sickness or invalid’s benefit?. Add to that the experience of our industry: there are more people claiming income protection benefits too. Some product features have been removed as a consequence: I recall when the default waiting period was 14 days, not 30, as it now is, nor 13 weeks, which has become very common.

A number of other ideas must therefore be considered to explain this seeming epidemic of disability.

• Increased diagnosis of some conditions, especially mental illness were examined, but they are covered by the review of overall morbidity noted above. Also, some of this increase was made up of reclassification of disorders that would have been identified differently in the past.
• Other changes in categorisation are considered – does your doctor deem you fit to work (so you are unemployed) or are you too sick to work? It is accepted that a little of this may have happened at points. I can think of an example I am aware of, but the researcher also notes the growth in sickness benefits even while unemployment is falling.
• ACC changes are considered too – and the idea that qualification for ACC was made harder, and therefore qualification for a benefit was an easier alternative is an attractive one. Some small effect was allowed for this.
• Social change is also offered as an explanation too – this is interesting. As female labour force participation has risen so a woman in her fifties, for example, who might have never worked (outside the home that is, there is always plenty of work there), today would more likely be in the workforce and consider incapacity as a reason to claim a benefit. Some allowance is made for this.

But it turns out that the biggest impact isn’t what gets you started on the sickness or invalids benefit. The biggest contributor to rising rates is a decline in getting people off the benefit, and back to work.

Insurers tell us the same thing. The problem with most Income Protection books is that you get more claims today that go on for longer. Of course, they can’t all be ‘bad’ claims, but it is surprising that people that recovered and went back to work in thirty years ago are, on average, slower to recover and get back to work today.

Tags: Income Protection Russell Hutchinson

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