How COVID-19 Affected Life Insurance
The COVID-19 pandemic changed a lot of things about our world and the life insurance underwriting market is no exception. Life insurance applications have increased significantly since 2020, while the insurance industry itself has struggled to understand the virus’s impact on mortality. Life insurance payouts have soared—to the tune of $90 billion in 2020 and $100 billion in 2021.
These increases have been the largest jump since the 1918 influenza epidemic. Here is how COVID-19 is affecting the underwriting process.
Uncertainty about mortality and long COVID
Insurance companies depend on “mortality assumptions” and the “capital requirements” needed to ensure insurance companies stay solvent. The main problem is that we simply do not know the extent of COVID’s impact on mortality, or how preexisting conditions and other issues affect survival—and probably won’t for at least another five to ten years.
Insurance companies are gathering data about long COVID, the lingering and often life-altering symptoms that have plagued some survivors for the past two years.
Consumers can expect to see COVID-related questions on their application forms, such as whether the applicant has tested positively before, and whether they have a current diagnosis. Experts worry that the questions may be confusing, and consumers may misread them and answer incorrectly, leading to denial of benefits.
The Consumer Federation of America has asked the National Association of Insurance Commissions to adopt a model rule for life insurance underwriters, to protect consumers and avoid confusion. If these rules are created and adopted, they will help consumers avoid future denials.
Life insurance can be an important part of your estate plan. For experienced estate planning assistance in Tampa, FL, contact Baumann Kangas Estate Law today.