Rise in Non-Covid-19 Deaths Hits Life Insurers

Last year, as expected, life insurers in the United States paid out a large number of Covid-19 death-benefit payouts. Surprisingly, many people saw an increase in other types of death claims as well.

Source: WSJ | Published on February 23, 2022

Private Placement Life Insurance (PPLI)

Many of the other fatalities, according to industry executives and actuaries, are linked to delays in medical care as a result of 2020 lockdowns, and then, later, people's fears of seeking treatment and difficulty lining up appointments.

Some insurers expect these deaths to remain high for some time, even if Covid-19 deaths are down this year.

Globe Life Inc., Hartford Financial Services Group Inc., HIG, Primerica Inc., and Reinsurance Group of America Inc. were among insurers reporting higher non-Covid-19 deaths compared to pre-pandemic baselines in earnings calls for the previous two quarters.

"The losses we are seeing continue to be elevated over 2019 levels, we believe, due at least in part to the pandemic and the presence of either delayed or unavailable healthcare," Globe Life finance chief Frank Svoboda told analysts and investors earlier this month.

Deaths from heart and circulatory problems, as well as neurological disorders, are among the non-coronavirus-specific claims, he said. "We anticipate that they will become less impactful over the course of 2022, but we do expect to see some elevated levels throughout the year," he said.

In their fourth-quarter earnings call, Primerica executives expressed concern about an unusually high number of non-Covid-19 deaths in 2022. "Some of these will be the result of delayed medical care or an increase in the incidence of societal-related issues, such as an increase in the prevalence of substance abuse," Chief Financial Officer Alison Rand explained in an email interview.

Many medical professionals have expressed concern about Americans' untreated health problems since the pandemic's early stages, as Covid-19 has put strain on the nation's healthcare system.

According to the American Council of Life Insurance, the 2020 pandemic will result in the largest annual increase in death benefits paid by U.S. carriers since the 1918 influenza epidemic, amounting to billions of dollars. However, the impact on the industry's bottom line has been less severe than anticipated, owing to the fact that many victims are older people who typically have smaller policies, if any coverage at all.

Nonetheless, Covid-19 and other excess deaths have reduced many carriers' quarterly earnings, particularly as deaths linked to the Delta variant have increased for people in their working years who have employer-sponsored death benefits. "Earnings impacts have been material, and there still appears to be some Covid-19 discount, but investors are beginning to consider mortality claims costs," said Andrew Kligerman, a stock analyst with Credit Suisse Securities.

Death-benefit claims typically vary only slightly year to year, so the recent increases are out of the ordinary.

According to some life insurers, non-Covid-19 excess deaths increased in the third quarter of last year after being negligible or modest in previous quarters. These findings are consistent with findings from the Society of Actuaries Research Institute's ongoing Covid-19 survey of 20 of the nation's leading sellers of group life insurance to employers.

According to R. Dale Hall, managing director of research at the society, incurred claims counts were 37.7 percent higher than a pre-pandemic baseline in the third quarter, with a nearly 50-50 split between claims directly tied to Covid-19 and those that weren't. The group is still analyzing data from the fourth quarter.

Mr. Hall reported that non-Covid-19 excess claims were 19% in the third quarter, compared to 18.7 percent for Covid-19 claims. In previous quarters, non-coronavirus-specific excess claims did not exceed 6.4 percent.

In a conference call with analysts, Hartford Financial Chief Executive Christopher Swift stated that the company "experienced higher levels of non-Covid excess mortality during the quarter," which included heart, stroke, and cancer causes of death.

He explained that the company's experience with such claims "has been very bouncy over the last six quarters, so I don't see a trend per se," aside from those that appear to "indicate maybe a second-order effect with Covid and people not taking care of themselves." The insurer is one of the largest group-benefits providers in the country.

According to CEO J. Scott Davison of nonpublicly traded OneAmerica Financial Partners, claims for working-age adults were about 140 percent of a pre-pandemic baseline during the third quarter.

He claims that Covid-19 is responsible for roughly two-thirds of the excess deaths. Mr. Davison's team believes that some of the remaining deaths, in addition to those caused by delayed medical care, may be the result of previous Covid-19 infections. He cited scientific evidence that the virus may pave the way for future medical complications, implying that survivors may "later die from the toll Covid has taken on their bodies."

The impact of Covid-19 on the cost of life insurance, both directly and indirectly, is unknown. Some insurers say they are modestly pricing group-life contracts on the assumption that the virus will be present at least until 2022. These contracts are usually renegotiated every couple of years. Meanwhile, insurers are still attempting to determine what impact this may or may not have on long-term mortality.

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