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First COVID-19 Wave Hit Preferred Insureds Hard: Work Group

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What You Need to Know

  • Almost all COVID-19 life insurance claims were for people ages 45 or older.
  • Insureds in their 70s had the worst overall increase in claims.
  • The numbers for older smokers may shock you.

The first big wave of U.S. COVID-19 cases may have increased the odds of dying more for healthy older people with individual life insurance than for older insureds with chronic health problems.

The pandemic also may have increased the odds of older nonsmoker insureds dying more than of older smoker insureds dying.

The Individual Life COVID-19 Project Work Group has published data raising those possibilities in a new report, U.S. Individual Life COVID-19 Mortality Claims Analysis. The Society of Actuaries, LIMRA, Reinsurance Group of America Inc. and TAI are the paper sponsors, and they hold the copyright on the paper.

Methods

The research team started with information on 2.5 million U.S. individual life insurance claims that were sent to 27 U.S. life insurers from January 2015 through June 2020.

The team excluded information about deaths occurring after June 30 to minimize the impact of data reporting lags. It is planning to publish a sequel, based on more complete data, in the coming months.

Findings

The team found that deaths attributed to COVID-19 accounted for 5.1% of the individual life insurance death claims participating insurers received in the first half of 2020.

About 2% of all of claims for all causes were for people younger than 45. That was about the same percentage as in 2019.

About 1% of the COVID-19-related claims submitted in the first half of 2020 were for people under 45.

The overall increase in the odds of dying from any cause was highest for insureds in their 70s.

For insured women in their 70s, the odds of dying increased by well over 20%. For insured women in their 80s, the odds of dying increased about 10%.

For insured men in their 70s, the odds of dying from all causes increased by about 15%. For insured men in their 80s, the odds of dying from any cause were about the same in the first half of 2020 as in 2019.

Risk Classification

Life insurers classify people as standard risks, substandard and preferred risks.

  • For insureds under age 50, being a nonsmoker or a preferred insured, held down the odds of dying from any cause in the first half of 2020.
  • For insureds over age 70, especially, being classified as a nonsmoker or a preferred risk, seemed to increase the impact of the pandemic on the odds of dying.
  • For insureds in their 70s and their 90s who were classified as preferred risks, the odds of dying from any cause were more than 40% higher than in 2019.
  • For insureds in their 80s who were classified as preferred risks, of the odds of dying from any cause were about 30% higher.

The individual life team called the poor results for the preferred risks surprising but did not speculate about the reasons for those results.

COVID-19 Geography

The first wave of the COVID-19 pandemic hit the area around New York City hard in early 2020.

The individual life team found that about 33% of the COVID-19 claims recorded in the first half of 2020 were from the beneficiaries of insureds who died in the New York-New Jersey region.

“NY-NJ had a terrible April not experienced anywhere else in the country,” the individual life team wrote.

The individual life team said the nature of their study might affect efforts to interpret the mortality data.

There are large differences between the insureds in different regions of the country, and some of the patterns emerging from the data may reflect where the 27 participating life insurers sold their business, rather than the characteristics of the entire population of people with individual life insurance, the individual life team said.

(Chart: CDC)

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