COVID-19 has raised some of the greatest underwriting challenges for the life insurance industry since World War II, as was reported in a May 10 Wall Street Journal story Some Americans Are Being Turned Away Trying to Buy Life Insurance. It follows that the industry making financial guarantees that can last for decades to deliver benefits to families and businesses would need time to assess COVID-19 developments to comply with regulations governing our sector and for consumers of industry guarantees.
Data from the Centers for Disease Control and Prevention makes it clear that older Americans have been hit the hardest by the pandemic.
Unprecedented disruption to mortality data has created significant uncertainties for setting life insurance premiums in the near term for this important group. And what is certain is that each life insurer has a duty to consumers under state law to treat people with similar health characteristics with an even hand. Insurers fulfill this duty by regularly assessing health and mortality developments.
Regulators also expect insurers to prudently take on risks that balance assets and liabilities. This has helped consumers access affordable life insurance for decades.
Another challenge for insurers – and one compounded by the pandemic — is the protracted low interest rate environment. Lower rates make it harder to invest policyholder premiums for growth. Solid long-term investment returns also keep coverage affordable and accessible for consumers.
While COVID-19 will inform underwriting, life insurance is a dynamic business, and companies want to write new policies. This pandemic won’t stop them from offering in the future even more than the nearly $20 trillion in financial protection they’re providing today for families and businesses large and small across the country.