According to the American Council of Life Insurers (ACLI), the Covid-19 pandemic last year resulted in the largest increase in death benefits paid by U.S. life insurers since the 1918 influenza epidemic.
ACLI said that death-benefit payments increased 15.4 percent in 2020 to $90.43 billion, owing primarily to the pandemic. Payments increased by 41% in 1918.
Because many of the victims were older people with smaller policies, the impact on the insurance industry was less severe than expected early in the pandemic. In 2019, the industry paid out $78.36 billion, and payouts have typically increased modestly year after year.
According to an industry research group, Covid-19 also resulted in the fastest increase in insurance policy sales in 25 years. When combined with positive returns on some insurers’ investments, industry assets increased 7.7 percent to $8.2 trillion in 2020, according to ACLI data.
Don E. Lippencott, a longtime Long Island agent for New York Life Insurance Co., said he hopes to deliver death-benefit checks in person to clients. During the pandemic, he was unable to do so.
Mr. Lippencott described the experience as “gut wrenching and excruciating.” Twenty-three of his clients died in 2020, more than doubling the 10 to 12 deaths he had experienced in previous years, with Covid-19 responsible for ten of the deaths.
He said the majority were in their 80s and 90s, and the payouts ranged from $50,000 to $3 million.
“You just sit here and cry,” he said, referring to clients he’d known for decades. Normally, an agent’s role includes “being there with these families,” but lockdown restrictions prevented this. “We couldn’t be there, we couldn’t go to funerals, we couldn’t personally deliver the checks,” he explained.
It is unclear how many of the 385,343 deaths identified as Covid-19-related by the Centers for Disease Control and Prevention in 2020 were people who had life insurance.
Some publicly traded life insurers reduced their estimates of their exposure last summer, as measured by payouts per 100,000 U.S. Covid-19 fatalities. This was due to the fact that deaths were disproportionately concentrated among the elderly, who tend to have smaller policies than those still in the labor force, if they have coverage at all.
Working people are frequently covered by life-insurance programs provided as an employee benefit, and some purchase individual policies to help cover the expenses of their families in the event of a premature death.
According to CDC data, the arrival of the Delta variant altered the dynamics slightly. While approximately 80% of Covid-related deaths in 2020 occurred among those 65 and older, this year 69 percent of deaths occurred among those 65 and older, with the remaining 25% occurring among those 45 to 64.
According to federal data and Johns Hopkins University, the number of Covid-19 deaths in the United States in 2021 surpassed the toll in 2020 last month, bringing the total number of reported deaths to more than 770,800.
The 1918 flu pandemic, according to the CDC’s website, killed approximately 675,000 people in the United States, with mortality rates highest in children under the age of five, people aged 20 to forty-five, and people aged 65 and older.
According to Andrew Melnyk, the ACLI’s vice president of research and chief economist, the ACLI’s data show two other years, both in the 1920s, when year-over-year increases topped 15% during influenza epidemics.
Ratings firm A.M. Best Co. in a report this week stated that the current pandemic has been accompanied by robust sales of both life and annuity products, among other factors helping the industry weather the turmoil. Best said it had changed its outlook for the industry from “negative” to “stable.”
According to Limra, an industry-funded research firm, total new life-insurance premiums increased 18 percent in the first nine months of 2021, the highest growth rate for a nine-month period in 25 years.
Constant reports of Covid-19 deaths “It’s not as visceral a realization as it was last year,” Collis Temple, national sales director at Primerica Inc., said. As a result, there is still motivation to purchase life insurance that did not exist prior to the pandemic.
Primerica’s death claims for 2020 increased 15.8 percent year on year to $1.7 billion, which the company attributes in part to Covid. Total face amount of policies issued increased 16 percent compared to 2019, while sales in the third quarter of this year “started to normalize toward pre-pandemic levels,” according to the company.