Mirroring the conclusions of a recent analysis by the Geneva Association, a new report from the Canadian Institute of Actuaries (CIA) suggests that the COVID-19 pandemic is having a limited impact on the life insurance industry – at least for now.
In a newly published report, the CIA analysed monthly claims data collected from Canadian life insurance companies including Canada Life, Sun Life, Manulife, Industrial Alliance, and nine others. All 13 companies submitted data on individual life insurance; 11 of them submitted data for both individual and group insurance. The data covered the period from January 2019 up to June 2020.
The preliminary analysis, which looked at aggregate levels of life insurance claims and claims related to COVID-19, suggested that overall, claims by count following the onset of the outbreak were within the range of normal volatility, as were the aggregate claims by amount.
“Even though there's been some increase in claims in April and May 2020, they're not significant enough amount to raise red flags or concerns for the health of the insurance industry,” said Keith Walter, chair of the CIA’s Research Council. “They're certainly within volatility levels that are tolerable for the industry overall.”
When the data collection process started in April, Walter said, the proponents of the research “weren’t sure what we were going to find.” At the time, there was evidence of some level of excess mortality in the population, and nobody knew how long the first wave of the pandemic would last. Following Canadians’ collective efforts to flatten the curve, the researchers see hopeful signs from the data that the first wave was contained.
Still, the industry shouldn’t breathe too easily. As Walter noted, the pandemic is not over, which means there’s still an urgent need to continue to track results and detect any possible trends as they develop.
“This report is a very high-level snapshot, indicative analysis of the results,” he added. The research is proceeding to its second phase, which would have the CIA work with the industry to complete a much more extensive analysis that will dive deeper into the initial data, as well as incorporate more data from participating insurance companies. “Given how significant this pandemic is and the potential impacts, I'd expect to look at it at least every three months to see how it's developing.”
One interesting finding from the initial report is a disparity between group insurance and individual insurance. In both categories, aggregate claims counts generally followed the same trajectory over time as aggregate claims amounts. But in April, the COVID-19 pandemic appeared to exert an outsized impact on individual insurance, which saw a more significant rise in the number of claims reported and the aggregate claims amount compared to group insurance.
That differential impact, according to the CIA, could have been due to the fact that group insurance generally represents a younger population. That made it less likely to be impacted by the pandemic, which has been more lethal to older members of the population – many of whom likely had a reasonable amount of life insurance in effect – than younger and healthier individuals.
“But what we're seeing now is the pandemic’s impact is getting wider,” Walter said. “As it transitions, it's affecting more and more younger people. I think that's one thing we'll want to continue to watch: as it has a broader impact on society, not just the older age, are we going to see more claims in group insurance in the future?”
Aside from the second wave, he said the researchers are very concerned about potential long-run impacts. That includes possible lagging effects on Canadians’ overall health from undiagnosed or delayed surgeries, mental-health issues associated with lockdowns and sudden job loss, and other direct or indirect consequences of COVID-19.
As they continue with their work, Walter said the CIA will try to extract as much information as possible from the data they receive. But because of Canada’s fragmented system of healthcare and government, there can be inconsistencies in reporting that could create challenges for researchers.
“A lot of the health statistics and death statistics are controlled at the provincial level, and not all that information is consistently provided to insurance companies,” he said. “Certain data like age, geographical location, and gender are relatively easy to get, but information on diseases other than COVID-19, for example, may be inconsistently reported, so we may be limited in some of the analysis that we can do.”
Against the backdrop of the COVID-19 crisis, Walter said the Canadian life insurance industry has responded admirably. Through the participating companies’ efforts to share data, he said they’ve shown a shared commitment to understanding what’s going on, and ensure that the country is protected by sound financial services and strong institutions.
“Actuaries are taking their role very seriously in ensuring that the pandemic is not causing concerns for Canadians in terms of the health and safety of their life insurance,” he added. “We're doing our jobs in making sure the Canadians are well protected. … The insurance industry needs to be around in 100 years, and so we need to make sure we’re paying attention to all that’s happening every day, but with that long-term view in mind.”