How has COVID-19 impacted life insurance?

As of February 2022, the pandemic has caused more than 5.59 million deaths across the world. It’s also contributed to an increase in mortality rates and a decrease in life expectancy worldwide. As a result, the life insurance industry has paid out much more than its usual annual budget.

Mark Friedlander from the Insurance Information Institute said, “Death benefits paid in 2020 jumped to $87.5 billion, up from $76 billion in 2019, the largest increase in nearly 25 years.”

Luckily, the industry has managed to avoid insolvency or bailouts – because the demand for life insurance has also increased. Life insurance sales rose by 18% in the first three quarters of 2021, a sign that, in the wake of a pandemic, people see the true value of protecting themselves.

So far, insurance prices have stayed steady

According to the 2022 report by Policy Genius, the price of life insurance has, somewhat surprisingly, remained steady throughout the pandemic. Premium prices are based on long-term trends, making them harder to predict, but also means they’re often uninterrupted by fleeting shifts in the market.

COVID-19 errs on the side of a long-term trend, with vaccines and new treatments minimising the potential risk of pandemic-related deaths.

However, insurance price analysts may soon reconsider pricing to account for the rising risk of other COVID-related illnesses or another pandemic, ultimately scenarios that would alter long-term industry trends.

Increase in demand for life insurance

Also, the demand for life insurance has skyrocketed worldwide since the beginning of 2019. People have looked to life insurance as a comfort blanket during a time of increased fear and financial insecurity – a move that has helped bolster the industry through COVID-19.

Looking forward to the future

COVID-19 has been a huge driver of change, and the life insurance industry is no exception. There’s been a big jump in demand, more competition and a shift in consumer buying behaviour as people understand the value of having life insurance. Fortunately, it’s not led to an overall increase in policy prices – yet.

Insurance companies have paid out more than usual which has also increased claim ratios. Then there’s the potential mortality risk profile of COVID-19, especially for the elderly and individuals with pre-existing health conditions. Each of these movements affects fixed-income and equity investments, as well as the life and annuity products insurers sell. In other words, the premiums you pay.

Taking out life insurance – online versus broker

As the demand for life insurance increases, and with social distancing requirements likely to continue, it’s natural for people to purchase life insurance policies online. When considering your options for life insurance, you can buy directly from the insurance company or through an insurance broker.

Here’s why you want to work with a broker:

• They’ll help you understand the myriad of policy options and insurance companies so you can build a plan and choose products that fit your life insurance needs.
• They’ll help you through the application and underwriting process, most of which can be done through online communications like Zoom.
• They act as valuable advisors, not just when you are buying a new policy, but during big life changes when you might need to review your policy. They will also assist your beneficiaries during claim time.
• Most importantly, they’ll ensure you choose a policy that provides sufficient coverage and works best for your budget in the long term. Not all insurance companies offer the same products, so shopping around to compare policies is essential.

Protect your future: get life insurance today

While the social and medical consequences of COVID-19 have been significant, the shock to the economy and markets is having a large impact on life insurance and annuity companies. While life insurance premiums have remained steady so far, circumstances can change. Work with an insurance broker to compare policies from multiple providers to make sure you get the best price and coverage for you and your family.

Time to take out life insurance? Talk to an expert at Global Finance today.

**Underwriting criteria and insurer terms T’s and C’s apply