Life (Insurance) and Mortality

For many, the word “mortality” reminds them of death and dying. For those of us in financial services, however, mortality speaks to life — life insurance, that is. Insurance companies use mortality tables to help determine premiums and to make sure their company manages risk and remains solvent. The past two years of the pandemic have upended not only what the average consumer thinks of life insurance, but also the mortal- ity rates and assumptions that companies utilize. This article provides insights on mortality data for insured individuals, from the beginning of 2020 through  the  end  of first quarter 2021, and offers a perspective on the business impact for companies that offer fully underwritten individual life insurance.

Survey Says … Excess Mortality

People who own life insurance tend to have better mortality results than the general population. This is due to the impact of underwriting and the selection of lower-risk individuals in terms of existing medical conditions and other factors. In addition, life insurance owners tend to be in higher socioeconomic groups that often have lower mortality than those in lower socioeconomic groups. Based on CDC data, the general  population  experienced  approximately 20 percent excess mortality in 2020, while our findings indicate that overall, fully underwritten individual life insur- ance business experienced 12  percent  excess  mortality in 2020.

Mortality tends to vary by quarter even in a “normal” year with the first and fourth quarters slightly worse than the second and third quarters due to the normal impact of the annual flu season. The impact of the flu on mortality was slightly lower than historical experience in 2019 and into the first quarter 2020, but we can clearly see the impact on mortality of  COVID-19,  with  excess  mortality  of  15 percent in the second quarter (Figure 1). Excess mortal- ity for fully underwritten business peaked at 22 percent in the fourth  quarter  of  2020,  then  dropped  back  to 13 percent for the first quarter of 2021.

The Demographics of Mortality

Gender
Insured excess mortality was similar for men and women during the first few  quarters  of  the  pandemic  (10  to  15 percent, on average), with men’s mortality worsening during the fourth quarter of 2020 and the first quarter of 2021 (23 and 14 percent, respectively). In contrast, the general population saw excess mortality greater for men than for women throughout this period.

Age
Excess mortality varied by age, but it affected different ages at different times. For example, during the beginning of the pandemic (Q2 2020), excess mortality was greatest for those over age 45 (around 15 percent). During the third quarter of 2020, excess mortality was greatest for those under age 25  (26  percent).  And  working  adults  aged  45 to 64 were hit the hardest in the first quarter of 2021 (26 percent).

Geographic Region
Mortality results for New York/New Jersey — and to a lesser extent the Northeast — in April and May, are high versus other regions, which is consistent with the initial wave of COVID-19 hitting these areas the hardest (Figure 2). Excess mortality generally increased again in all regions in the second half of 2020, with December having the highest excess mortality for the majority of the regions.

Figure 1
2020 Excess Mortality — Fully Underwritten Business

Note: Percentages to the right show the degree of excess mortality as the amount exceeding 100 percent when 2020 results are compared with the expected trend in results based on the five years prior to the pandemic.
Source: U.S. Individual Life COVID-19 Mortality Experience Study, Fourth Quarter Update, LIMRA/SOA/RGA/TAI, 2021.

Figure 2
2020 Excess Mortality

By geographic region and month

Note: A/Es (actual deaths divided by expected deaths). A/Es above 120 percent are shown in yellow, between 110 percent and 120 percent in purple, and below 95 percent in green.
Source: U.S. Individual Life Insurance: COVID-19 Mortality Experience Study, LIMRA/SOA/RGA/TAI, 2021.

Implications of Changing Mortality

How will the effects of the pandemic influence insurance company strategy in the near future? Companies will need to:

• Continue monitoring mortality results to determine the extent to which the impact of the pandemic we saw in 2020 and 2021 will continue into the near future.
• Examine emerging data regarding the frequency of long-COVID cases as well as the increases in non-COVID-specific causes of death, and the resulting impact on mid- to longer-term mortality As the data emerge, companies may need to make long-term strategic decisions, including changes to underwriting and pricing of life insurance products.
• Monitor regulatory developments regarding what questions they can ask potential customers about COVID, at the time of underwriting.
• Consider changes to their mortality assumptions, and whether they will need additional  capital  to  cover the risk of future mutations or  additional  waves  of the pandemic.
• Look to emerging data regarding the possible long- term impacts of COVID on mortality, including the virus’ impact on the heart, lungs, and nervous system.

All of these factors no doubt will influence and guide deci- sions regarding the cost of providing mortality protection in the future. The industry will need to continue to collaborate as it did for this project, across various stakeholders (companies, reinsurers, and industry trade associations) — to collect and disseminate data to support ongoing and up-to-date analysis of business impacts during this critical time.