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Has COVID-19 Changed Life Insurance?

The Landscape of Life Insurance during COVID-19

COVID-19 has certainly changed the landscape of insurance companies and insurance policyholders since 2019. Beneficiary claims have risen and on average, more people are applying for life insurance.1

The American Council of Life Insurance, a leading trade association driving public policy and advocacy on behalf of the life insurance industry, gathered data and analyzed results for 2020 and 2021 resulting in these findings:2

  1. By the close of 2020, more than $90 billion was paid to life insurance beneficiaries. It represents a 15.4% rise in benefit payout over 2019. This is the highest year-over-year increase since the influenza epidemic of 1918.3An additional 11% rise in 2021 drove this number to over $100 billion.4
  2. While there was record-breaking growth in life insurance applications and policies issued for insurance companies in 2020 and 2021, there was a slight decline of 2.3% in year-over-year activity by November 2022.5
  3. In the first quarter of 2023, applications and policies issued has risen again and a steady growth continues.6

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Data provided by the Centers for Disease Control and Prevention (CDC) is reporting the mortality rates related to COVID-19 are more across the board for all ages and not just impacting the elderly as the media and other sources claim.

Has COVID-19 affected the mortality assumptions and underwriting process?

With COVID-19 affecting the rise in applications and policies issued, life insurance actuaries and underwriters have the challenge of analyzing and predicting the underlying mortality assumptions of COVID-19 mortality rates against ‘normal’ or average mortality rates. Collecting and interpreting these findings may affect how life insurance underwriting proceeds in regard to COVID-19. 7

Underlying mortality assumptions are projections of expected death rates used by actuaries to estimate insurance premiums and pension obligations. This is based on mortality tables, which are statistical tables of expected annual mortality rates.8

Data provided by the Centers for Disease Control and Prevention (CDC) is reporting the mortality rates related to COVID-19 are more across the board for all ages and not just impacting the elderly as the media and other sources claim.9

Presently, life insurance companies need to evaluate how they will go forward in assessing individuals and groups with the information of mortality assumptions. This may affect future consumers.10

COVID-19 questions on some life insurance applications

Beginning in 2021, some American insurance companies began asking COVID-19 risk classifications questions to applicants on their life insurance application forms.

After life underwriters in Europe began imposing waiting periods before considering insuring former COVID-19 patients, the Consumer Federation of America (CFA) was prompted to send a letter in January of 2021 to the National Association of Insurance Commissioners (NAIC) asking that American underwriters use clear and transparent approaches to safeguard consumers.10

In the letter, the CFA requested that NAIC adopt a model rule requiring any underwriting rules relevant to COVID-19 be employed in the underwriting process. The letter requested this process is made public prior to use, be transparent, and meet certain standards or reasonability.

Beginning in March 2020, NAIC made supporting the efforts of U.S. insurance regulators their number one priority in an effort to protect insurance consumers and ensure stabilized insurance markets. They responded with many actions for consumer protection and have issued two reports during the pandemic cataloguing their efforts.11

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Digital online applications

The ease of using accelerated underwriting with no-exam required form and processing applications online has increased the number of life insurance policies issued.

Traditionally, an in-person paramedic visit is required as an initial or preparatory medical examination to assess the risk factors for an individual. With COVID-19 making in-person visits from life insurance agents and medical professionals prohibitive, virtual and online applications became popular.

Allowing easy access to life insurance applications, online or virtually, increased life insurance applications, making it easier for both life insurance agents and potential policyholders to successfully engage.

Two options for online applications are ‘accelerated underwriting’ and ‘no exam’ insurance applications.

  • Accelerated underwriting involves asking questions that would accelerate the underwriting process. Eligibility varies by life insurance companies, but generally an individual must be between the ages of 18 and 60 with no pre-existing medical conditions, no criminal record, and in good financial shape to qualify.12
  • A no-exam life insurance allows a person to apply without a health exam. You complete a health questionnaire, and based on your answers, you are placed in a risk classification.  During the pandemic this was a plus, but the downside is the premiums are usually higher.

A sense of financial security

COVID-19 gave people a sense of insecurity about their future. It’s given all of us a closer view of how fragile life can be. This pandemic has also been a catalyst for people, maybe for the first time, to talk with their loved ones about the need for life insurance and protecting their family’s financial security.

Insurance actuarial experts believe it may be five to10 years before we may understand COVID-19’s complete impact on how it has changed the landscape of life insurance.13 Meanwhile, life insurance companies continue to provide financial protection for policyholders and their loved ones.


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