Since putting together the “where is inflation going?” article last October, we have been in discussions with multiple insurance carriers and have confirmed that a number of them have already completed or currently are evaluating their “manual rates” (rates for the insurer’s broader block of business) for both Life and Long Term Disability insurance benefits. These reviews will result in additional increases for both of these employee benefits respectively. 

All carriers have indicated that the perpetually long period of unusually low interest rates has put financial pressure on their rates given that they are required to hold substantial reserves for active claims related to both the Life waivers and LTD disabled life reserves. It is interesting to note that they are completing these reviews even though many thought leaders believe we may finally see interest rates increase in 2017. Regardless, these insurers are putting through manual rate increases in their blocks of business and are looking to implement these changes in addition to the other risks noted below. 

Based on these discussions we are recommending that plan sponsors revise their expectations for Life rate increases to be about 5% to 10% and for LTD rate increases to be about 8% to 12% versus our original projections of 3% to 5% and 5% to 8% respectively. When you now put it all together with these revised projections, the cost of employee benefits is expected to increase approximately 9% per year for the foreseeable future, and that would be in a relatively normal plan. If your plan has other additional cost drivers (i.e. older population, higher utilization, high turnover, etc.), you could be looking at even higher increases. 

Each organization’s needs are unique and warrant a customized solution. We would be pleased to discuss your specific situation with you to identify the best strategy with respect to your employee benefits program. Should you have any questions on the above, please don’t hesitate to contact me or a member of our team. 

At ZLC Financial we are not the world’s biggest benefits advisor but we are large enough to have the best people, resources and clients in Western Canada. Our goal is to work with you to find a better way for your employee benefits plan. We provide this value to you by leveraging one of the most skilled benefits teams in the city – almost 250 years of experience within our team of 12 employee benefits specialists. We have been working with businesses ranging from 4 to over 7,000 employees for the past 30 years.

By Dan Eisner