COVID-19’s impact on the life insurance industry
COVID-19 has impacted numerous industries, including the life insurance industry. Adapting to new markets, putting the customer first, and remaining agile in one’s business practices has become paramount. As John White, The Unisure Group’s Head of International Group Life and Disability, explains, this approach has stood the company in good stead.
In the face of extreme uncertainty and increased mortality rates, life insurance premiums generally remained steadfast
When the pandemic first hit, experts saw the soaring COVID-19 mortality rates and predicted that the effects on the life insurance industry would be enormous. The reality has been quite the opposite, however.
In an article for World of Labor, Economics Professors Timothy Harris, Aaron Yelowitz, and Charles Courtemanche used data from approximately 800 000 term life insurance policies from 95 distinct companies to analyse whether or not life insurance companies changed their pricing and offerings in response to COVID-19. The authors found that although some companies with low-priced policies differentially increased premiums for older individuals, most remained steadfast and consistent.
It pays to keep the bigger (long-term) picture in mind
“While we did see some of our competitors excluding COVID-19-related life and disability insurance claims early on in the game, at Unisure we chose to maintain our pre-COVID-19 premium rates without any changes,” says White.
Not only does the relative impact of increased mortality rates on an insurer’s business depend heavily on the age profile of the company’s policyholders and where they live, but the uncertainty around accurate forecasting, the duration of the pandemic, and the global release (and estimated success) of the COVID-19 vaccines are all factors that play a part in an insurer’s response.
“Life insurance underwriting is always a long-term business,” White cautions. “Results and profitability can never be judged in a short space of one or two years, such as during the ongoing pandemic.”
This is evident in the fact that the UK’s mortality rates are at historically low levels for the time of year (May 2021). According to the Continuous Mortality Investigation (CMI), mortality was 7% lower than usual when compared with the same week in 2019. Not only that, but between weeks 14 and
week 17, there were an average of 4% fewer deaths than expected, indicating that the country’s vaccination drive is having a positive impact.
The lesson to be learned here seems to be that without accurate data and forecasts, and without knowing exactly what we will be dealing with in the longer term, the life insurance industry would be wise to proceed with caution and carry on with business as usual until more accurate data becomes available.
It’s morbidity, not mortality, that we should be paying attention to
As we learn more about COVID-19, one particular area that the life insurance industry is paying attention to is the rise in post-COVID-19 syndrome (or ‘Long COVID-19’) cases. According to the UK’s Office for National Statistics, in March this year, over 1 million people in the UK were reporting ongoing Long COVID-19 symptoms. Of those, an estimated 674,000 people reported that their symptoms had “negatively impacted” their ability to perform day-to-day tasks.
Generally, Long COVID-19 symptoms last for 8 – 12 weeks, and experts are classifying the symptoms in two main groups: One is primarily respiratory (such as having a cough and feeling breathless, and also suffering from fatigue and headaches), while the second group of symptoms affects many parts of the body, including the heart, brain and the gut.
While Unisure has experienced very limited Long Term Disability (LTD) claims as a result of COVID-19 thus far, this is not the case for other insurers. The RGA (Reinsurance Group of America) says that in its industry surveys, many disability carrier participants report significant concern over the pandemic’s potential to reduce recovery and return-to-work rates among the long-term disabled.
As Schwartz, Conroy & Hack, a US law firm specialising in insurance, confirms, “It is impossible to measure how much post-acute COVID syndrome will impact long term disability claim activity, but it is clear there will be a significant uptick in applications.”
The law firm goes on to mention that individuals who file LTD claims in connection with Long COVID-19 may face considerable obstacles in getting their benefits paid. “Insurance companies will require that claimants prove they have a disabling condition and that the condition prevents them from performing the material duties of their occupation. Claimants will need to get a diagnosis from a qualified physician who treats that condition.”
How is The Unisure Group handling Short Term Disability and Long Term Disability claims, and deferred periods?
It’s early days still. As Unisure learned when the pandemic first hit, it doesn’t pay to be reactive. Other than modestly increasing the deferred periods of our Short Term Disability (STD) coverages, in order to mitigate the effects of Long COVID-19 on Unisure’s Disability book, we remain steadfast and are keeping abreast of the latest research as it is released.
Unisure policies’ STD deferred periods are currently sitting at 28 days, but White says that this will possibly be further lengthened to as much as 35 days for sickness (keeping 7 days for accidents).
“Once the pandemic is finished, we will hopefully return our STD deferred periods to 7 or 14 days for both accident and natural causes,” says White. “Our STD has always carried a pre-existing condition exclusion clause, but we can see that it is becoming a point of interest as COVID-19 will affect so very many body organs. As a result of this, pre-existing conditions could become more encompassing.”
“On our LTD groups, Unisure issues a Guaranteed Issue Limit (i.e. a Free Cover Limit whereby, up to a set amount, there is no medical underwriting, except for sum insured benefit requirements above the Free Cover Limit). A typical LTD deferred period would be 13, 17 or 26 weeks, and, as of yet, the world is still learning what an expected standard disability time may be for Long COVID-19.
Clearly there is still much uncertainty around COVID-19 and Long COVID-19 syndrome. When it comes to client service and putting one’s customers first, however, acting responsibly, not reactively, will always be a good path to follow.
- John White, Head of International Group Life and Disability – The Unisure Group, Interview 10 May 2021
- World of Labor: The impact of Covid-19 on the life insurance market was minimal
- The Actuary: UK Mortality at historically low levels
- NBER Working Paper Series: DID COVID-19 CHANGE LIFE INSURANCE OFFERINGS?
- Elsevier Public Health Emergency Collection: Forecasting for COVID-19 has failed
- RGA (Reinsurance Group of America): Long-Term Disability in the Time of COVID-19: The Economic Impact of the First “Pandemic Recession”
- British Heart Foundation: Long Covid: what is it and what should you do if you have it
- The Guardian: Long Covid: snapshot poll finds more than 1m people with symptoms in UK
- Schwartz, Conroy & Hack: Spike in Long Term Disability Claims Expected as Post-COVID Syndrome Cases Grow