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Individual Life Claims Soared in the Second Half of 2021: Work Group

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What You Need to Know

  • The number of individual life claims was only 11% higher than usual for people ages 90 and older in the fourth quarter.
  • For people ages 50 through 59, the number was 21% higher than normal.
  • For people under 50, the number was 29% higher than normal.

The COVID-19 pandemic is continuing to devastate the kinds of people who are especially likely to have advisors: U.S. residents with individual life insurance.

For all U.S. residents with fully underwritten life insurance, the number of claims increased 19% above the 2017-2019 average in the third quarter of 2021, and 18% in the fourth quarter, according to new life industry data compiled by the Individual Life COVID-19 Project Work Group.

The total individual life insurance claim amount reported increased 54% above the 2017-2019 average in the third quarter and 35% in the fourth quarter.

What It Means

Your clients might like to think that the COVID-19 pandemic is over.

But from the perspective of an advisor trying to help a client with life insurance and retirement income planning, the pandemic is still raging.

A client may need extra help with protecting loved ones against the risk of the client’s premature death.

The client may also need disability insurance or other arrangements to prepare for the risk of suffering loss of ability to work due to COVID-19.

A client who gets through the pandemic without incident may be very healthy and have an above-average need for planning for the possibility of living past age 100.

The Data

The new life insurance claim analysis comes from the Individual Life COVID-19 Project Work Group.

The work group includes LIMRA, the Reinsurance Group of America, the Society of Actuaries Research Institute and Tindall Associates.

The work group received life claims data from 32 issuers of fully underwritten individual life insurance for the period from 2016 through 2021.

The claim reports covered about 72% of individual life insurance in force in the United States.

To compensate for the fact that the numbers for 2021 are still incomplete, the work group used the numbers reported as of Dec. 31 in each year included in the data.

The work group looked at life claims resulting from all causes. That means that some claims might be the result of indirect pandemic effects, such as the effects of the pandemic on hospital capacity and substance use disorders, rather than the result of deaths caused directly by COVID-19.

Age and Claim Counts

Early on, COVID-19 swept through nursing homes and killed large numbers of people there.

Some life insurance analysts speculated that the pandemic might have only a limited effect on working-age people, who tend to have more life insurance than older people.

Instead, in late 2021, the pandemic had a bigger effect on insured people under age 60 than on older insureds.

In the fourth quarter, for example, the number of individual life claims for people with fully underwritten coverage was just 11% higher than the 2017-2019 average for people ages 90 and older.

The number was 21% higher for people ages 50 through 59, and 29% higher than normal for people under 50.

Age and Claim Amounts

The third quarter of 2021 seems to have been one of the worst quarters of the pandemic for the reported individual life claim amount total for people ages 60 and older, and the worst quarter for people under 60.

The overall total for insureds of all ages was 31% higher than the 2017-2019 average.

The claim total was 49% higher than usual for insureds ages 50 through 59, and 66% higher than usual for insureds under age 60.

(Image: Adobe Stock)