U.S. life insurers paid a record $100 billion in death benefits in 2021, fueled by another year of Covid-19 deaths.
According to the American Council of Life Insurers (ACLI), payouts will increase 11% in 2021 to $100.19 billion, owing primarily to the pandemic. The increase followed a 15% year-on-year increase in 2020, when death-benefit payments totaled $90.43 billion.
The ACLI compiles data from insurers’ annual filings with state insurance departments. The group cannot break down causes of death due to limitations in the filings, but it is reasonable to attribute the majority of the increases to the pandemic, according to Andrew Melnyk, ACLI vice president of research and chief economist.
The year-over-year increases are among the highest seen since the 1918 flu pandemic, when payments increased by 41%. According to the ACLI, they are significantly higher than the 4.9% average from 2011 to 2021.
According to data from the Centers for Disease Control and Prevention, Covid-19 deaths in the United States will increase by 20% in 2021 to around 460,000. Deaths tended to be younger as the Delta variant spread across the country, though older Americans remained the majority of victims.
According to ACLI data, the Delta deaths significantly increased payouts under employers’ benefit programs, though the majority of the $100 billion came from individually owned policies.
Last year, Myrna Guerrero, a national sales director for Primerica Inc., one of the nation’s largest sellers of term-life insurance policies, said it was tragic to see young families affected by Covid-19 deaths. Policyholders in two of her Phoenix-area office’s term-life policies left behind three or more children.
“Obviously, we can’t take away the pain of losing someone, but they’ll be fine financially,” Ms. Guerrero said of the families. In 2021, approximately 25 of the office’s clients died, with approximately half of those having Covid-19.
According to Primerica, company-wide death claims increased by approximately 34% in 2021 to $2.25 billion, up from $1.69 billion.
Deaths that appear to be indirectly related to Covid-19 are also being reported by life insurers. Some companies reported increases in death claims in their quarterly earnings, which they believe are due to delays in medical care as a result of the 2020 lockdowns, and then, later, people’s fear of seeking treatment, as well as difficulty scheduling appointments.
The industry faced a seemingly crippling financial burden in the early days of Covid-19’s rapid spread. However, the cost has been manageable in part because so many victims were in their 80s and 90s and had small policies, if any at all.
According to Carmi Margalit, who leads the life-insurance sector at S&P Global Ratings, in a recent webinar, most insurers entered the pandemic with strong capital buffers.
In a November analysis, ratings firm AM Best maintained the industry’s stable outlook by citing strong sales across multiple product lines and diversified earnings streams.
However, an unusually large surge in life insurance sales has subsided this year.
Vickie Ford, a New York Life Insurance Co. agent in Tulsa, Oklahoma, said that in 2020 and 2021, she assisted about five families with claim paperwork for Covid-19-related deaths. That accounted for roughly half of all deaths in her office. Beneficiaries received payments ranging from $92,000 to $206,000.