According to the American Council of Life Insurers, payouts rose 11% to $100.19 billion in 2021, most likely due to the pandemic. The increase followed a 15% year-over-year increase in 2020, when death benefits totaled $90.43 billion.
The ACLI collects data from annual returns submitted by insurers to state insurance departments. Given the limitations on the records, the group can’t break down causes of death, but it’s reasonable to attribute most of the increases to the pandemic, said Andrew Melnyk, ACLI vice president of research and chief economist.
The year-over-year increases are among the largest since the 1918 flu pandemic, when payments rose 41%. They are well above the average of 4.9% from 2011 to 2021, according to the ACLI.
According to data from the US Centers for Disease Control and Prevention, Covid-19 deaths in the US are up 20% in 2021 to about 460,000. Deaths got younger as the Delta variant swept across the country, though older Americans were still largely the victims.
The Delta deaths significantly increased payouts under employers’ benefit programs, though most of the $100 billion came from individual policies, according to ACLI data.
Myrna Guerrero, a national sales director for Primerica Inc., one of the largest sellers of term life insurance in the country, said it was tragic last year to see young families affected by Covid-19 deaths. In two cases of term life insurance policies sold by its Phoenix area office, policyholders left behind three or more children.
“Obviously we won’t take away the pain of losing someone, but we’ll be fine financially,” Ms Guerrero said of the families. About 25 of the firm’s clients died in 2021, and about half of those had Covid-19.
Primerica said company-wide death claims are up about 34% to $2.25 billion in 2021, compared to $1.69 billion.
Life insurers are also seeing deaths that appear to be indirectly related to Covid-19. In the quarterly numbers, some reported jumps in death claims that they believe are related to delays in medical care due to the 2020 lockdowns, and then, later, people’s fears of seeking treatment, as well as difficulty getting appointments.
In the early days of the rapid spread of Covid-19, the industry faced a seemingly crippling financial burden. But the costs have proved manageable, in part because so many victims were in their 80s and 90s and typically had smaller policies, if at all.
Most insurers entered the pandemic with strong capital buffers, Carmi Margalit, who leads the life insurance industry at S&P Global Ratings, said in a recent webinar. Strong sales across product lines and diversified revenue streams are also helping, rating agency AM Best said in a November analysis that maintained the industry’s stable outlook. But an unusually large surge in life insurance sales has ebbed this year.
In Tulsa, Oklahoma, New York Life Insurance Co. agent Vickie Ford said she helped about five families file claims for deaths related to Covid-19 in 2020 and 2021. That was about half of the total deaths for her office. Payments to beneficiaries ranged from $92,000 to $206,000.
