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COVID-19 Increased LTCI Claimant Mortality 30%: Unum

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Unum Group says the COVID-19 pandemic increased the death rate for people collecting Unum long-term care insurance (LTCI) benefits by about 30% in the second quarter.

The increase in the number of LTCI insureds who died during the quarter was enough to cut the interest-adjusted loss ratio for the LTCI business to 67%, from a target range of about 85% to 90%, company executives said today during a conference call.

Unum executives also said they believe that the U.S. group life operations incurred about 1,100 more group life claims than usual, including 900 claims already received and another 200 claims that seem likely to come in.


Unum held the call to go over its earnings for the second quarter, and it has posted a recording of the call on its website.

The Chattanooga, Tennessee-based company got through the quarter with solid results. It’s reporting $266 million in net income for the quarter on $3 billion in revenue, compared with $281 million in net income on $3 billion in revenue for the second quarter of 2019.

The company says it’s maintaining a high level of liquidity and has about $1.6 billion in cash.

COVID-19 helped earnings in some ways, by depressing claims costs for products such as dental insurance.

Sales at the Colonial Life worksite sales unit were down 43%, because of the difficulty of holding face-to-face enrollment meetings, but U.S. coverage persistency levels were high.

But Unum’s results reflect the pain COVID-19 has caused for the world.

McKenney said the quarter amplified the need for what Unum does.

“The fragility of many Americans’ financial lives has never been more obvious,” McKenney said.

People’s need for short-term disability insurance, long-term disability insurance, life insurance and other protection products “is why we’re here,” McKenney said.

COVID-19 Impact

In the United Kingdom, for example, Unum’s disability insurance operation knows it’s having trouble getting the health system information it needs to process disability insurance claims.

In the United States, many employers were too busy shifting to work-at-home strategies to seek quotes for 2021 benefits plans.

The U.S. absence management program team has been helping employers cope with a 50% increase in the number of employees seeking some kind of leave.

And many insureds died. Unum has noticed an increase in mortality for its U.S. group life business, its U.S. voluntary and worksite life policies, its U.K. life business, and its U.S. LTCI business.

“Clearly, mortality impacts are the biggest variable on people’s minds,” Richard McKenney, Unum’s chief executive officer, said during the conference call. “When the pandemic started, it was believed to impact older ages much more severely, which meant that the belief was that group carriers, such as us, would see less claims, as the working population skews younger. In fact, what we saw was that the death rates were similar to our overall non-COVID age distribution.”

The average life insurance death claim at Unum was about $48,000 in the second quarter, and Unum believes that incurred death claims for about 0.9% of the 120,000 people who died in the United States in the second quarter, based on COVID-19 statistics from Johns Hopkins.

If about half of Americans have life insurance, and Unum’s statistics are similar to the second-quarter death claim statistics at all U.S. life insurers, that would imply that U.S. life insurers as a whole might have incurred responsibility for about $2.5 billion in death claims in the second quarter.

(Related: COVID-19 Might Have Caused $2 Billion in U.S. Life Claims So Far

The company has not yet noticed COVID-19 lead to any big increase in disability insurance claims.

The Long-Term Care Insurance Business

Unum no longer sells LTCI coverage, but it once was a major player in that market. It’s providing LTCI coverage for about 963,000 peoples, and it has incurred about 48,000 LTCI claims, according a presentation posted in December.

The average age of the insureds who are already on claim is about 83.

The number who died in the second quarter was much higher than normal, especially in April.

Because the insureds who were still living in the community were worried about the idea of exposing themselves to the virus that causes COVID-19, the number of people seeking to use their coverage to pay for any kind of formal long-term care services, including assisted living care and home care, as well as nursing home care, was down about 15%, executives said.

Unum is assuming that claims for home care will begin to rise before claims for facility care.

They also are assuming that some of the reduction in LTCI claims is the result of filing delays, and they have built a $20 million reserve for LTCI claim filing delays into the second-quarter results.

Unum US

Unum US, Unum’s based company’s traditional group insurance unit, is reporting $232 million in adjusted operating income for the latest quarter on $1.7 billion in revenue, compared with $254 million in adjusted operating income on $1.7 billion in revenue.

Commission spending fell to $154 million, from $158 million.

Here’s what happened to sales revenue for some key products between the year-earlier quarter and the latest quarter:

  • Group long-term disability: $55 million (up from $49 million)
  • Group short-term disability: $30 million (down from $37 million)
  • Group life and accidental death and dismemberment: $57 million (up from $54 million)

Colonial Life

Colonial Life, the worksite marketing unit, is reporting $91 million in adjusted operating income on $476 million in adjusted operating revenue, up from $84 million in adjusted operating income on $459 million in adjusted operating revenue.

Commission spending fell to $87 million, from $95 million.

Here’s what happened to Colonial Life sales for several key products, year-over-year:

  • Accident, sickness and disability: $45 million (down from $81 million)
  • Life: $16 million (up from $26 million)
  • Cancer and critical illness: $11 million (down from $20 million)

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