U.S life insurance claims rise at quickest pace since 1918 pandemic

by Leo Almazora12 Dec 2021

As the coronavirus pandemic spurred a torrent of interest in life insurance among consumers, insurers in the U.S. also saw their death benefit payouts rise at a record rate.

According to figures from the American Council of Life Insurers, death benefit payments rose 15.4% to US$90.43 billion in 2020, reported the Wall Street Journal. That’s the most the figure has increased since 1918, when the 1918 influenza epidemic sparked a 41% surge in payments.

Before the pandemic, American insurers have typically seen modest increases in payouts, which led up to the US$78.36 billion in death claims for 2019.

The latest surge is likely to cause some second thoughts among publicly traded U.S. life insurers. Last summer, some of those companies pared back estimates of their exposure, measured by payouts per 100,000 U.S. COVID-19 fatalities, as the deaths were heavily weighted toward older Americans who tend to have smaller policies than their younger adult counterparts.

That changed somewhat with the arrival of the Delta variant. According to figures from the U.S. Centers for Disease Control, approximately 80% of Covid-related deaths in 2020 were among adults 65 and older; this year, that cohort has accounted for 69% of Covid-related fatalities, and 25% were among those between 45 and 64 years old.

People in the workforce are more likely to have larger coverage than seniors and retirees. Workers tend to get life insurance coverage as an employee benefit, aside from which they can also take on individual policies to help protect their families financially should the worst happen.

The 1918 flu pandemic brought the number of U.S. deaths to roughly 675,000, according to the CDC. During that period, mortality was high among people younger than 5 years old, adults from 20 to 40 years old, and seniors who were at least 65 years old.

Insurance policy sales in the U.S. have also risen by the fastest in a quarter-century, according to industry-funded research firm Limra. Across the industry, total new life insurance premiums rose 18% for the first three quarters of 2021, the fastest pace for a nine-month period in 25 years.

The increased awareness and purchasing behaviour among consumers, combined with the returns on some investments by insurers, brought life insurance industry assets up 7.7% to US$8.2 trillion last year, according to the ACLI.