Death Benefit Payouts Continue To Rise At The Top 100 Companies

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The amount the life insurance industry distributes to beneficiaries continues to grow, as measured by death benefits paid out by the top 100 companies in this category.

The top 100 companies increased their payouts from 1999-2003 by a respective 4%, 10%, 7%, 3% and 8%, according to National Underwriter Insurance Data Services/Highline Data, from data culled from the NAIC Annual statement database.

Top 100 companies PDF

The increases may be in part due to two factors: an increase in the number of policies and the dollar amount of life insurance purchased over a 60-year period; and, an aging population that is fueling a rise in the number of deaths in the United States.

From 1940 through 2001, the number of policies and certificates purchased annually increased from about 18.2 million to about 40.1 million, according to the 2004 Fact Book published by the American Council of Life Insurers, Washington. In dollar terms, the purchase amount grew from $10.7 billion to $2.77 trillion during that same period, it says.

That growth reversed in 2002, the Fact Book says, when the number of new policies dropped to 38.7 million and continued in 2003 when it declined further to 35.5 million. Even so, the dollar amount grew to $2.8 trillion in 2003.

Even as the amount of life insurance grows, the population that purchased life insurance during those six decades continues to age. The age 65 and over population was 16.6 million in 1960 and 34.7 million in 2000. It is expected to grow to 39.4 million by 2010.

And, even though the mortality rate in the U.S. is on the decline, the number of deaths has actually grown, due perhaps to an increase in the population in this country.

The U.S. mortality rate in 1950 was 9.6% and the number of actual deaths excluding Alaska and Hawaii was 1.45 million, according to the Statistical Abstracts of the United States. In 2002, the mortality rate dropped to 8.5% while the number of deaths increased to 2.44 million, data from the Statistical Abstracts indicated. The mortality rate dropped even further to 8.3% in 2004, according to the Center for Disease Control, a division of the U.S. Department of Health and Human Services, which compiles mortality data.

Part of the reason the mortality rate is dropping while the number of deaths is increasing may be attributable to the growth in the U.S. population as a whole. According to the U.S. population clock sponsored by the U.S. Census Bureau, there are currently 295.2 million Americans. That compares with 150.6 million Americans counted in 1940.

For the top 100 companies, these statistics are reflected in the increase in death benefits paid to beneficiaries. For example, 76 companies had increases in the number of death benefits they paid out in 2003.

Changes in death benefits paid out in 2003 over 2002 were as follows: 24 companies had a 0-5% increase; 16, up 6-10%; 12, up 11-15%; 6, up 16-20%; 10, up 21-25%; 1, up 31-35%; 2, up 36-40%; 2, up 41-45%; 2, 300+%; and one in which comparisons were not available.

Twenty-four companies also had the following declines in 2003 over 2002: 15, from -1% to -5%; 4, -6% to -10%; 1, -16% to -20%; 2, -21% to -25%; 1, -26% to -30%; and, 1, -40% to -45%.

Changes in death benefits paid out in 2002 over 2001 were as follows: 26, up 0-5%; 10, up 6-10%; 13, up 11-15%; 7, up 16-20%; 3, up 21-25%; 2, up 26-30%; 3, up 31-35%; 1, up 36-40%; 1, up 41-45%; 3, up 50-100% range; and, 2, up 100+%.

Insurers in 2002 also paid out less than in 2001. Thirteen companies saw death benefits paid out decline by between 1% and 5% with others as follows: 4, -6% to -10%; 3, -11% to -15%; 1, -16% to -20%; 3, -21% to -25%; 1, -31% to -35%; 1, -41% to -45%; 2, -50% to -100%; and, one without data with which to compare 2002.

For companies with sizeable changes year over year, there were often plausible reasons for the fluctuation.

For instance, Sun Life Assurance Company of Canadas U.S. operations, Wellesley Hills, Mass., experienced a 1245% increase in death benefits paid in 2003 over 2002, a change that company spokesman Jeff Landis attributes to the acquisition and integration of Keyport Life Insurance Company.

In the case of Lincoln National Life Insurance Company, a 52% decline in benefits paid in 2002 over 2001 reflected the sale of Lincoln Re business to Swiss Re, according to Tom Johnson, a spokesman with Lincoln Financial Group, Philadelphia.

Glen Greenberg, a spokesman for Liberty Mutual, Boston, says the reason Libertys subsidiary, Liberty Life Assurance Company of Boston had a 327% increase in death benefits paid out in 2003 over 2002 was due to a recapture of a block of group life business that had been reinsured. A 20% decline in 2002 over 2001 was due to a runoff of old group life block of business, he adds.


Reproduced from National Underwriter Edition, January 6, 2005. Copyright 2005 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.