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Life Insurers Ponder How to Underwrite COVID-19 Survivors

Options range from the most severe—refusing to extend coverage—to treating the virus like cancer, respiratory illnesses and other conditions that must be disclosed when applying for life insurance.
  • Terrence Dopp
  • May 2021
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Key Points

  • Good: Most people who contract COVID-19 recover, and a massive vaccination effort is underway across the globe.
  • Bad: The Centers for Disease Control and Prevention and others have warned that even seemingly mild cases of the coronavirus can bring complications down the road.
  • Uncertain: Life insurance carriers need to decide how they’ll handle applications from people who have recovered from COVID-19.

As a volunteer EMT in suburban Houston, Richard Demko has seen scared young men with COVID-19 weep in the back of ambulances on their way to the hospital. As a life insurance professional, he's seen the insurance industry experience a different worry as the virus introduced uncertainty into every corner of the business.

Christopher DiGeorge DiGeorge Life Insurance Law

If you needed to be hospitalized due to COVID, that could make a difference. Insurers will want to know the details of the hospitalization just as they would if an applicant was hospitalized for anything else during that same time period.

Christopher DiGeorge
DiGeorge Life Insurance Law

More than a year into the pandemic, Demko and others have witnessed the life insurance world go through its own stages of COVID-19. There was the initial shock of an unknown virus spreading across the globe, followed by a rapid effort to adopt new technology and explore ways to continue sales and operations activity on a remote basis.

Now a new question is confronting the industry: How will underwriters deal with the multitudes of people who have recovered from COVID-19?

“I'm not really sure anyone understands the longevity and what's going to happen to someone's pulmonary system,” said Demko, a past president of a regional chapter of the National Association of Insurance &Financial Advisors and director of insurance for Centric Risk Strategies. “How does an actuary really understand the long-term effects of COVID?”

Because the two-year contestability period provides insurers some assessment time, companies have the opportunity to develop plans to factor COVID-19 into their current slate of diligence.

The most likely outcome, Demko said, is that COVID-19 questions will be asked on life insurance applications, included in sections about past or recurring respiratory illnesses.

“Unknown things scare insurance companies. Right now, there's plenty of unknown,” Demko said. “It's easier to have a broad-based question on any respiratory or pulmonary issues in the last two years. Because that's going to be encompassing of any COVID condition.”

It's possible that insurers would underwrite a client who later dies of COVID-19 within the two-year contestability window and the benefit would be scaled back, Demko said. He likened the current uncertainty to that that once surrounded HIV/AIDS, which went from being untouchable for life insurers to a manageable condition that doesn't always pose an insurmountable barrier to coverage if it's disclosed early in the application process.

Jan Graeber American Council of Life Insurers

Unfortunately, the full long-term health impact is not yet known. Companies continue to analyze the most-recent data available and make their own determination on the impact to their application process.

Jan Graeber
American Council of Life Insurers

More Recovery

According to the Centers for Disease Control and Prevention, most people with COVID-19 recover and return to normal health. As of late March, CDC data show there have been about 30 million cases in the U.S., with just over 540,000 deaths.

Yet some people experience so-called “Long COVID” and can face symptoms that persist for weeks or months after their initial recovery. Those symptoms commonly include fatigue, shortness of breath, cough or pain in the chest or joints.

Other long-term symptoms can range from brain fog or depression to inflammation of the heart muscle, altered lung functions and even kidney problems.

Cardiac imaging tests taken months after a recovery have in some cases shown lasting changes to the heart, even in people who experienced mild COVID-19 symptoms, according to the Mayo Clinic. These changes could increase the risk of heart failure or other heart complications in the future, it said.

Additionally, the type of pneumonia often associated with the virus can cause long-term damage to air sacs in the lungs and the scarring can cause breathing problems, Mayo found. Even in young patients, the disorder can cause strokes, seizures and Guillain-Barré syndrome or short-term paralysis. It might increase the risk of later developing Parkinson's disease or Alzheimer's.

The CDC is still in the process of long-term studies, as COVID-19 is new and the mountains of data available for other conditions such as cancer and asthma don't yet exist.

As a result, insurers now must decide how to deal with a disease for which little to nothing is certain, from a standpoint decades into the future. Options range from the most severe—refusing to extend coverage—to treating it like cancer, respiratory illnesses and other conditions that must be disclosed when applying for life insurance.

Nicky Virgo, vice president, global underwriting, and head of manual development at Reinsurance Group of America, said COVID-19 is “clearly a multisystem disease” with implications for mortality and morbidity, particularly in cases of long COVID. Complications that need to be watched include lung fibrosis, heart failure or stroke.

“The range of outcomes varies quite widely,” she said. “For individuals who have suffered from COVID-19, their risks are assessed in an identical way to that of any individual who is a survivor of other diseases—by considering them based on their current health status and using the best information that is available to us.”

The U.S. and other countries have been on a vaccination push that by late March had resulted in about one-in-three Americans being vaccinated. The goal of those programs is herd immunity—the point at which enough people are immune that the spread is nearly stopped. Until that point, COVID-19 remains a fact of life.

Complicating matters is the rise of new variants, such as the B.1.1.7. strain that was first detected in the U.K. in the autumn and has been found to spread more quickly than initial incarnations. Add to that P.1 from Brazil, which may be tougher for antibodies to detect, and B.1.351 from South Africa.

Richard Demko Centric Risk Strategies

Unknown things scare insurance companies. Right now, there’s plenty of unknown.

Richard Demko
Centric Risk Strategies

Increased Mortality

A recent Best's Market Segment Report, “US Life/Annuity Industry Weathers the Pandemic Well in 2020,” found most companies in the life and annuity sector have strong balance sheets but are facing issues that both predate the pandemic and have been exacerbated by it. Those include the need for top-line growth, prolonged low interest rates, the need to use technology to improve efficiency and the need to better align the business model with the needs of customers.

AM Best also found mortality to be better than initially anticipated for 2020, though life insurers struggled with sales, and volumes didn't recover from a drop-off until later in the year.

Jan Graeber, senior health actuary for the American Council of Life Insurers, said carriers need to assess near-term COVID-19 impacts such as the outcome of vaccination efforts, developing strains of the virus, and changes to consumer behavior alongside those that may be longer-lived. Long term, the industry also needs to watch the virus's effects on those who recover from it.

Nicky Virgo Reinsurance Group of America

For individuals who have suffered from COVID-19, their risks are assessed in an identical way to that of any individual who is a survivor of other diseases—by considering them based on their current health status and using the best information that is available to us.

Nicky Virgo
Reinsurance Group of America

Graeber is responsible for advocacy on long-term care, risk classification and supplemental benefits for ACLI, which represents more than 280 member businesses across the life and annuity space. The current experience indicates an anticipated increase in mortality, particularly for people with underlying health conditions. Graeber said people may also be deferring care during the pandemic. Both situations are fluid and the full impact may not be readily apparent for many years, she said.

“Unfortunately, the full long-term health impact is not yet known,” Graeber wrote in an email. “Companies continue to analyze the most-recent data available and make their own determination on the impact to their application process.”

The type and magnitude of these impacts vary due to the unique characteristics of companies and the products they sell, she said. Companies, along with industry experts, continue to watch and analyze the impact of COVID-19 on the individual life insurance industry and mortality.

Life insurance attorney Christopher DiGeorge, whose firm DiGeorge Life Insurance Law specializes in representing beneficiaries of denied claims, sees transparency as key. It's far better for insurers to ask about the virus as part of their application process rather than leave any degree of uncertainty. “Ultimately, the consumer wants a life insurance contract that is going to protect their loved ones the way they intended so the additional questions being asked are a good thing,” he said.

“For somebody who was a COVID survivor who was not hospitalized, I don't think there will be any difference in underwriting or approving new life policies,” he added. “On the other hand, if you needed to be hospitalized due to COVID, that could make a difference. Insurers will want to know the details of the hospitalization just as they would if an applicant was hospitalized for anything else during that same time period. Except in this case it happens to be COVID.”

In cases when insurers deny payment of claims, the beneficiary typically spends six-months to a year battling the company before giving up and Googling “life insurance attorney” late at night, he said. So the first COVID-related death claim denials are just coming into the system, he said.


Terrence Dopp is a senior associate editor. He can be reached at terry.dopp@ambest.com.


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