What You Need to Know
- COVID-19 cut the average U.S. lifespan by 12 months last year.
- An expert says U.S. life expectancies may continue to decline.
- Lower life expectancies should lead to increases in life settlement payouts.
Last spring, we had no idea what effect the Covid-19 pandemic would have on life insurance policies. Sadly, we all knew that many people were going to succumb to the coronavirus and that it could have an impact on life expectancies and how insurance companies view individual policyholders.
At the time, we spoke to several agents, representing large institutions, and the typical response was that the wheels of change turn very slowly in the life insurance world. They said that actuarial tables generally don’t vary too much year-over-year, even during strange times like these.
However, we recently learned that COVID-19 has indeed had a dramatic impact on life expectancies in the United States. In fact, in 2020 the average American’s life expectancies plunged by a full year. This is remarkable news.
According to the CDC, in the first half of 2020, life expectancy at birth for the total U.S. population was 77.8 years, declining by 1.0 year from 78.8 in 2019. Life expectancy at birth for males was 75.1 years in the first half of 2020, representing a decline of 1.2 years from 76.3 years in 2019. For females, life expectancy declined to 80.5 years, decreasing 0.9 year from 81.4 years in 2019.
We expect that this revelation will have a dramatic impact on the life settlement market, in both the short and long term. With the average American lifespan dropping a full 12 months, the life settlement equation, heavily influenced by life expectancy calculations, will change and definitely affect how policies will appraise. Offers should go up.
The federal researcher who produced the report said she was shocked by these numbers, and that we haven’t seen a decline of that magnitude in decades.
Another expert, former New York City Health Commissioner Dr. Mary T. Bassett, who is now a professor of health and human rights at Harvard, said that we may see U.S. life expectancies stagnate or decline for some time to come. She was referencing some of the racial inequalities that the study showed. Life expectancies of the Black population declined by 2.77 years. Life expectancies for the average Hispanic dropped by 1.9 years while the average for a white American dropped by 0.8 years. The gap between Black and white Americans, which had been narrowing, is now six years. Dr. Bassett said she expected life expectancies for Hispanics to continue to decline as the Hispanic population has been heavily impacted by Covid-19.