Insurers saw death benefits rise 15.4% in 2020, the biggest one-year increase since the 1918 Spanish flu epidemic, followed by a record $100.28 billion — nearly double the historic norm — in total death benefits paid out by the industry in 2021.
“The numbers were naturally forecasted to climb during the pandemic, but some industry and health authorities are concerned the rates haven’t greatly diminished as COVID infection rates have declined,” InsuranceNewsNet reported.
According to InsuranceNewsNet, insurers are especially concerned by data from the Centers for Disease Control and Prevention (CDC) that show “mortality rates alarmingly rising for different categories,” including younger adult mortality rates that are up more than 20% above historic norms in 2023.
The CDC numbers reported in August show the death rate for Americans ages 15-45 rose 20-24% above normal in 2020, and soared in 2021, to a nearly 30% death increase for 15-year-olds and a more than 45% increase for 45-year-olds.
Surge in excess deaths ‘caught carriers off guard’
Most troubling to insurers, CDC data reported in August showed that Americans in the period January-May 2023 were still dying at abnormally high rates with the pandemic long over. Mortality rates were 25% higher than normal among 15- to 19-year-olds and 20% higher among 45-year-olds considered in the prime of life.
Even twenty-somethings were dying at a rate nearly 15% above normal and thirty-somethings at a pace 20% higher than usual, the CDC data show.
Samantha Chow, global leader for Life, Annuity and Benefits Sector at Capgemini, a large, multinational Paris-based consulting company, told InsuranceNewsNet, “The surge in excess deaths caught carriers off guard” and the issue demands urgent attention by the industry.
The issue is, “Can the industry handle a sudden spike in claims?” She added, “The real concern for life insurers lies in preparing for an unexpected wave of death claims and the impact on their assets under management.”
“Do they have enough reserves to weather these outflows, given the excess deaths? It’s not just about death or health,” Chow said. “It is about the industry’s ability and readiness to manage this monumental outflow.”
The excess deaths and the record drag on insurance company revenue and the predictive chaos in actuarial tables they represent, alarmed the Society of Actuaries (SOA), the world’s largest professional actuarial organization.
Excess mortality is defined as excess deaths in a given population and time period above the expected number.
The SOA has conducted ongoing research since 2021 to gather “a high-level view of U.S. Group Term Life Insurance mortality results during the COVID-19 pandemic” compared to prior baseline results.
The SOA Research Institute studied more than 2.7 million claims and over $120 billion in earned premiums reported by “20 of the top 21 U.S. group term life insurers” in the U.S., representing approximately 90% of the employer-based group term life insurance industry.
In an August 2022 poll among its more than 30,000 members worldwide, the SOA found that 85% of members thought excess mortality rates would continue to 2025. In August this year, the same poll found 79% believed excess mortality rates will continue through 2026.
Life insurance executives and actuaries told InsuranceNewsNet, “The numbers are alarming and could continue to drag earnings and surge death claims for years to come.”