Best’s Special Report: With Spiking Mortality Rates Come Sharp Increase in Life Insurers’ Paid Death Benefits
Analysis by AM Best shows
In its Best’s Special Report, “Mortality Risk Worsening Due to COVID-19,” AM Best states that COVID-19 was the main reason for the rise in claims, but notes that many companies also have stated that delays or the unavailability of medical care as a result of pandemic-related lockdowns also increased non-COVID-19-related deaths compared with pre-pandemic baselines. Additionally, societal-related issues, such as the resurgence of substance abuse, also contributed to the increase in death claims.
The research shows that severity of impact on insurers depends largely on where they operate. Despite the surging life claims, just 20 states exceeded the average national percentage increase of 37.9%. However, according to the report, more than 55% of death benefits paid in 2021 originated from those states.
“While the number of deaths has increased to the point that average
The report notes that deaths among younger age groups also was a driver of higher paid death benefits. Older populations, which accounted for a greater number of deaths initially in the pandemic, typically do not have higher face amount term life policies. Even a smaller number of deaths at younger ages with less premium in reserves could potentially have a larger impact on earnings. Additionally, mortality in the group life segment began to rise in the third quarter of 2021, as the incidence of COVID-19 deaths moved into the working-age population. Although death claims are likely to be lower in 2022 compared with 2021, the level still is likely to be elevated compared with pre-pandemic norms.
“Insurers can reprice new policies to better account for the additional COVID-19 mortality risk,” said
To access the full copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=321412.
For a video discussion about this special report, please go to http://www.ambest.com/v.asp?v=ambmortalityrisk622.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in
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Source: AM Best
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