Industry Needs To Unify On Federal Backstop For Group Life
Time is running short in the 107th Congress and it is high time for the life insurance industry to unite behind the effort to include group life insurance as one of the coverages qualifying for federal assistance in the event of major losses caused by terrorism.
The need is clear. Article after article in National Underwriter has documented the fact that catastrophe reinsurance coverage for group life is very scarce, and where available, very expensive.
Acts of terrorism undermine the basis on which group life is underwritten. Life insurers underwrite group life based on mortality tables that have withstood the test of time.
Life insurers can predict with great precision the number of deaths that will occur under normal circumstances and they price the product accordingly.
But an act of terrorism that causes massive, and unpredicted, loss of life at a single workplace shreds the underpinnings of group life underwriting.
When a risk becomes unpredictable, it becomes uninsurable. Thus, without a reinsurer of last resort for losses caused by terrorism, the entire group life industry, which provides a highly-valued employee benefit, is threatened.
Unfortunately, the life insurance industry appears divided on this issue. Some life insurers, it is reported, have managed to cobble together private group life reinsurance programs.
They reportedly oppose including group life in the terrorism insurance bills currently pending before Congress because they believe they have a competitive advantage.