COVID-19 Accelerates No-Exam Trend in Life Insurance
COVID-19 is a new pandemic virus that accelerates the no-exam trend in life insurance. However, it is not the end of the world. While some areas of evolution will continue, other aspects of the pandemic may require further analysis. The industry will have to evaluate mortality, risk assessment, and balance sheet impacts, among other things. This article will examine the implications of the virus on traditional medical underwriting and life insurance premiums.
Limiting private sector appetite for pandemic risk
While the COVID-19 pandemic is an incredibly tragic human event, its economic impact is significant. Developing an insurance program for pandemic risk will be essential for responding to this pandemic and other future outbreaks. In addition, the public-private solution for pandemic risk will allow businesses to understand the risks, obtain insurance coverage, and adopt practices to mitigate losses. In addition, corporate boards and senior management can evolve their risk management practices to recognize and act on pandemic risks, and government agencies can focus on preparedness, mitigation, and insurance as a solution for building resilience.
Despite the lack of adequate funding to insure against COVID-19, a public-private partnership could create a federal-backed pandemic reinsurance program. A similar approach was used to develop a terrorism risk insurance program. Developing a backstop for pandemic insurance could be accomplished by applying lessons from existing risk pools. In addition, private insurers lack the resources to cover COVID-19 pandemic losses.
Impact on life insurance premiums
The impact of COVID-19 on life insurance premium costs is unknown. However, Oliver Wyman, the company that developed COVID-19, noted that the virus has impacted mortality, financials, operations and sales. A OECD report also discussed the positive impact of reduced flu claims in the U.S. as a result of the virus. In addition, a report by the European Insurance and Occupational Safety Agency (EIOSA) provided an overview of the sector’s initiatives in order to comply with the new rules.
A number of insurers have suspended applications for older adults and are raising their age restrictions. Many of these insurers have increased the age cutoff for older adults and are evaluating the impact of COVID-19 on their underwriting guidelines. However, the insurance industry will continue to monitor the situation as more data becomes available. It could take many years before life insurers decide whether to lift the age limit or not.
Impact on accelerated underwriting programs
With the advent of streamlined underwriting, the number of life insurers offering accelerated underwriting programs has increased. In fact, according to the Munich Re Life US survey, nearly one-third of all life insurance companies are now offering accelerated underwriting programs. These streamlined programs are similar to fully-underwritten products without the need for medical examinations and fluid collections. The results of the study reflect the adoption stage and maturity of each individual accelerated underwriting program.
Moreover, since these programs have not yet been widely implemented, a rigorous monitoring process is important to ensure their success. Carriers should monitor mortality and lapse experience separately from fully-underwritten programs. For this purpose, carriers should conduct random hold-out, post-issue underwriting, and other methods of monitoring leading indicators. While it is difficult to measure the impact of accelerated underwriting on mortality rates, these methods can provide valuable insights into the evolving accelerated underwriting experience.
Impact on traditional medical underwriting
While major medical plans may no longer require medical underwriting, it is still a necessary part of the life insurance and disability insurance industry. These types of policies are available through individual market companies, large group companies, and government-run programs like Medicaid. This article will examine how these changes impact these types of policies. But, first, let’s examine why underwriting is still necessary for these policies. It will explain how medical history and other factors may be used to determine an individual’s eligibility for coverage.
Changing demographics, new medical conditions, and increased demand for insurance coverage have all changed the nature of underwriting. While many insurers are embracing more digital solutions, traditional underwriting is still essential. In response to an increased applicant pool, insurers may relax their underwriting criteria. The result could be lower rejection rates and lower premiums. But a shift in underwriting criteria will have an effect on the industry in general.