How COVID is changing the life insurance marketplace

Life insurance companies paid a record $90 Billion to beneficiaries in 2020 and $100 Billion 2021. That represents the largest year-over-year increase since the 1918 influenza pandemic.

While the specific cause of the record payout is not broken down, it can be partly due to the COVID-19 pandemic, which was associated with 460,513 US deaths in 2021, making it the third largest leading cause of death in the US last year according to the CDC.

Life insurance companies are still gauging the full impact of the COVID-19 pandemic and what it could mean for the future of the sector and the underwriting process.

The industry is still struggling with how COVID-19 and long-term COVID related symptoms are affecting mortality assumptions and subsequently the underwriting process of life insurance and disability insurance moving forward.  The full effect may not be known for years to come.

The uncertainties stems from multiple COVID related variables.    Experts don’t know yet how factors such as preexisting conditions, compromised mental health, delayed care, or lingering long COVID symptoms will affect their mortality assumptions.  As assumptions change, the capital requirements needed to keep life insurance providers solvent also change.  And this all factors into the overall cost of the policy.

“It’s going to take 5 to 10 years for us to fully understand what patterns we’re starting to see.” – Stuart Silverman – Principal and consulting actuary at Milliman.

The demand for life insurance coverage has also increased since the pandemic began.  Record breaking year-over-year growth of 3.9% in 2020, compared to 2019, and 3.4% increase in 2021.  While consumers rush to protect their loved ones, they may begin to see COVID related questions on life insurance applications.  Questions regarding your history of testing positive for the disease, or your current diagnosis along with potential questions about vaccine status.

It’s important to understand the questions on the application and answer them correctly.  An inaccurate answer has the potential to void your life insurance policy, leaving your loved ones with a return of the premiums paid instead of the death benefit upon your death.



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