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Jury still out on whether COVID-19 will boost or damage life insurance market

Insurance Forums Staff

Hearing some mixed messages about the COVID-19 pandemic’s impact on life insurance? You’re not alone.

The media will tell stories of life insurers saying how the COVID-19 pandemic has caused a huge surge in interest, but then you might hear reports about how the pandemic could be the industry’s downfall.

The latest report from the MIB Life Index shows the pandemic has interrupted a two-month growth trend in U.S. life insurance application activity. Applications were down -2.2% year over year in March, but more significantly, off -6.7% from that of February.

February’s month-to-month activity suggests pandemic related demand for life policies with application activity at its highest for a January/February period since 2015. For the Q1 March close, the MIB Life Index composite remained up 1.8% YTD, some -2.2% off from February’s 4.0% YTD close.

Whether the COVID-19 pandemic ultimately helps or hurts sales of life insurance remains to be seen. Many insurers reported surges in applications as some consumers became fixated on the possibility of dying from COVID-19 and rushed to obtain coverage they had previously left on the back burner.

The pandemic could also hurt sales with the disruption in face-to-face sales and by pushing life insurers – who hate unknowns more than anything else – to tighten underwriting standards and a higher mortality-related increase in the cost of life insurance premiums.

Credit rating firms Moody’s, AM Best and Fitch Ratings all recently adjusted their outlooks for U.S. life insurers, changing their status from stable to negative.

Fitch reported there could be a potential spike in virus-related deaths that would significantly affect insurers’ earnings, reserves and capital, Moody’s mentioned the “lower-for-longer” interest rate environment while AM Best said it would conduct “stress testing” of insurers to see how the coronavirus could impact balance sheets.

A new LIMRA study of 47 American and 12 Canadian life insurers found that life insurance applications didn’t change much in March. However, how people are getting coverage has changed.

While one-third of companies in the survey said they saw fewer face-to-face applications, one-quarter said they saw more online applications in March. LIMRA also found more than one-quarter of U.S. life insurance companies expanded automated underwriting practices.

While the coronavirus pandemic does not stop anyone from applying for life insurance, a global health crisis like the COVID-19 outbreak can make the process more complicated. Applicants need to provide details about their medical history and recent travel, so if they’ve been exposed to the virus or have visited a high-risk area it may complicate the application.

Some insurers, including Lincoln Financial Group and AIG, among others, are imposing 30-day waiting periods for applicants who have recently visited regions hardest hit by the coronavirus pandemic.

Others are offering 90-day extensions for applicants to get their medical exams during the coronavirus pandemic, so consumers can get quicker coverage without having to wait until social restrictions have been lifted.



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