COVID-19 Mortality Spike Hits Insurers

There was an expectation by life insurers that COVID-19 deaths would decline as vaccination rates increased throughout 2021.

That has not happened.

In a shocking twist, mortality rose sharply, and many insurers are recalibrating their actuarial projections.

“Based upon our analysis of [Centers for Disease Control] national data, there has been a 40% increase in death rates for individuals age 18 to 64 years old across the U.S. when comparing Q3 2021 data to pre-pandemic data from the same period in 2019,” said Jonathan D. Neal, spokesman for OneAmerica.

The impact for OneAmerica totals more than $100 million in group life insurance and disability claims for 2020 and 2021, Neal added — roughly $35 million and $80 million, respectively.

“We’re seeing right now the highest death rates we have ever seen in the history of this business,” J. Scott Davison, the CEO of OneAmerica, said during an online event last month.

Life insurers projected higher losses from the COVID-19 pandemic but were caught off guard by the latest mortality data. Nearly everyone was.

In April 2021, Fitch Ratings wrote that it “expects pandemic-related mortality claims to decline in 2021 due to the global rollout of vaccines. This assumes that virus variants will not diminish the effectiveness of the vaccines.”

As of press deadline, the U.S. had recorded more than 832,000 deaths attributed to COVID-19. Centers for Disease Control data shows overall deaths spiking to 145% of 2019 levels during the third quarter of 2021.

The CDC lists COVID-19 as the cause for 50,600 deaths in third quarter 2021.

Not As Much Impact

Foresters Financial sells a variety of individual life insurance and annuity products. It is a different product mix and a different market than OneAmerica, noted Matt Berman, president of Foresters’ U.S. life insurance division.

While acknowledging that a 40% mortality increase is “stunning,” Berman reported a different picture at Forresters.

“We’re not experiencing that type of mortality,” he said, declining to divulge specific numbers. “But I will say that we have certainly experienced an uptick in mortality.”

The data is certainly concerning in the bigger picture, Berman added.

“I’m always concerned about the business we underwrite,” he said. “We are a long-term financial services operation. We underwrite promises today, and we have to be certain that we're alive and thriving years from now to deliver on those promises.”

The obvious major difference from group life insurance offered by OneAmerica and individual life insurance is in the underwriting, Berman explained. Foresters is usually including blood and fluid testing in its underwriting.

“We also underwrite business on the nonmedical basis, and that means that we're not utilizing blood and fluid from the individual applicant,” Berman said. “We're using other databases, and we price for that presumed mortality slippage.”

One of the things life insurers are doing in the age of COVID-19 is sharpening the underwriting process to better identify risk. While insurers are not requiring or asking about vaccination status, they have added other questions to the application process.

“The questions we inserted at the outset of the pandemic, we asked, ‘Are you currently experiencing any flu-like symptoms at the moment?’” Berman noted. “We asked about travel. They were questions that were trying to appropriately underwrite the risk.”