Sky-High COVID-19 Mortality Not Affecting All Life Insurers The Same

Regulators set future mortality rates today. — COVID-19 death rates will impact how insurers do business.

By John Hilton

Life insurance executives shuddered last week with news of a reported 40% increase in death rates due to the COVID-19 pandemic.

There was an expectation by life insurers that COVID-19 deaths would decline as vaccination rates increased throughout 2021. That has not happened.

“Based upon our analysis of [Centers for Disease Control] national data, there has been a 40% increase in death rates for 18- to 64-year-old individuals 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.

But those mortality rates might not be what they seem for most life insurers. OneAmerica does a robust business in the group life insurance space, which means looser underwriting.

The impact for OneAmerica totals more than $100 million in group life insurance and disability claims for 2020 and 2021, Neal said -- 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 earlier this month.

But individual life insurers are not seeing the same mortality impact.

A Different Picture

Foresters Financial sells a variety of individual life insurance 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 Foresters.

“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 including blood and fluid testing where it fully underwrites the risk.

“We also underwrite business on the non-medical 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.”

More Specific Questions

One of the things life insurers are doing in the age of Covid 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.”

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 today, the United States had recorded more than 836,000 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 as the cause for 50,600 deaths in the third quarter 2021.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.