Underwriting for Older Ages and in General…Where Did the Pandemic Leave Us?
The landscape for life insurance underwriting at older ages shifted during the pandemic and purchasing life insurance policies for people over age 70 became problematic. Insurance companies did not have any data on how older individuals would be effected and if mortality at these ages would be bias against insurance companies. Thus, at the start of the pandemic in March of 2020, sales of life insurance policies to people ages 70+ came to a grinding halt at many carriers. What transpired amongst carriers was different. Some carriers immediately stopped selling policies to anyone age 70+. A few carriers would consider individuals ages 70+ if they were in good health — a person rated preferred or standard rates. Other carriers limited the amount of coverage that could be purchased.
As the pandemic progressed, insurance carriers began to gather data and learned that what they initially believed might be a catastrophic hit to policy holders and death claims, was not the case. Yes, there were plenty of death claims, but the amount of claims did not severely impact mortality at older ages. How COVID is Impacting Life Insurance for Younger People
In a recent article found in Best’s Review, ‘Life Insurers Not Free of COVID-19 Yet, as Virus Impacts Younger Populations,’ (January, 2022) there were several takeaways in the information presented about life insurance carriers and COVID’s impact on the industry and surprisingly its impact on younger populations. Life Insurance Industry Leaders Report Unclear 2022 Forecasts Life insurers told investors in their 2021 third-quarter earnings reports that virus-related deaths had increased above expectations, showing that COVID is continuing to have a signiﬁcant impact on the industry. With unknowns surrounding emerging variants, insurance experts say the outlook for 2022 remains unclear. As reported in the Best’s Review article, “A year and a half into COVID-19 pandemic, life insurers via a flurry of third-quarter earnings calls and statements notified investors that virus- related deaths had increased and that the ages of those who were dying had crept downward into the working-age population. “Andrew Sullivan of Prudential reported in his company's earnings call, “that deaths among working-age Americans in the 35-to-54 range tripled.” While initially insurers surmised that COVID-19 would more so impact people age 70+, now they are ﬁnding that younger Americans are also impacted, further complicating the forecasts.
Also noted in the Best’s Review article mentioned above, Paul Graham, senior vice president, policy development at an industry advocacy group American Council of Life Insurers said, “It will take time to know the full impact the COVID-19 pandemic has on mortality and the life insurance industry, including the most recent quarter. Before the onset of the pandemic the U.S. opioid crisis was affecting mortality and offsetting other positive factors such as healthier lifestyles and medical advancements. The implications are still emerging for the life insurance industry. Nobody knows exactly how COVID will impact the long-term mortality of the country yet.”
Purchasing Life Insurance Post-COVID
While many of the restrictions to purchase coverage have now been lifted some carriers have outlined new underwriting guidelines for the 70+ age group trying to purchase coverage. While there may still be some underwriting differentiation between the older and younger ages the differences relate to underwriting rate classes and what a carrier is willing to accept. For example, some carriers will accept rate classes above standard for insureds up to age 80 and require a standard or better risk class for anyone over age 80. So what are we seeing?
1. Some carriers require proof of vaccination as part of the underwriting process to determine an insured’s risk class.
2. Some carriers assess unvaccinated individuals who have COVID comorbid conditions must be healthy enough to obtain a rate class of at least table D.
3. Most carriers will postpone a case for 10 to 30 calendar days for persons who are COVID positive when they apply for coverage.
4. The foreign national market was shut down during COVID; however, it has re-opened and carriers are able to consider coverage for insureds with nexus willing to come to the United States to purchase a policy.
So, what does this all mean?
It appears that the life insurance industry is moving full speed ahead and selling policies to individuals with pre-COVID underwriting rules. Mortality costs don’t seem to be heavily impacted; thus, the return to more familiar underwriting practices allow for a more “normalized” underwriting process and issuance of life insurance policies.
Ferne Landman has been with our firm since 1983. She is the Director of Operations. Along with her team of five professionals, they work with the insurance advisors to present well crafted and creative insurance solutions to their clients.