Life Insurance and the Pandemic (2024 Edition)
Claims Skyrocket in 2021—More than the Experts Anticipated
When the Delta virus rolled in, life insurers found themselves under a sudden financial rainstorm:
- U.S. claims hit US$5.5 bn (S$7.4 bn) in the first nine months.
- Entire 2020 payout was only US$3.5 bn, as experts had hoped vaccines would keep the numbers flat.
This was more than a surprise; it was a money‑raising spectacle that even Klaus Miller of Hannover Re couldn’t have predicted.
Why the Numbers Swelled
- Delta hooked onto people twice as easily as the original strain and pushed more folks to the hospital.
- Deaths skewed younger and unvaccinated—exactly the groups most likely to own life policies.
- Countries with big outbreaks (USA, India, South Africa) saw the heaviest spikes.
Company Highlights: How Each Spoke to the Numbers
- Aegon (mostly U.S. business) saw its Q3 claims in the Americas climb to US$111 m from US$31 m last year.
- U.S. firms MetLife and Prudential Financial reported upward moves as well.
- Old Mutual in South Africa tapped into its pandemic reserves to pay out more.
- Reinsurer Munich Re raised its 2021 Covid claim estimate from €400 m to a hefty €600 m (S$925 m).
What This Means for the Future
Long‑term life policies run for at least 20 years, so premiums haven’t yet absorbed this spike in death rates. Competitors keep prices in check, but actuaries warn that
- Rising claims could cut deeper into insurers’ capital buffers.
- In 2020, U.S. deaths jumped 12 % above average, a figure that LIMRA told Reuters was not “huge” because of reserves.
Yet the key takeaway: insurers are recalibrating to match the new reality of short‑sharpe, high‑transmission variants.
Bottom Line
Life insurance might have survived the first wave, but it’s now riding a roller coaster with the same twists and turns as the virus itself—fast‑moving, unpredictable, and with a wild number of passengers. The industry’s next seatbelt? Thorough risk reassessment and smarter pricing strategies that keep the financial safety net intact while still being fair to policyholders.
Crystal ball-gazing
Insurers & Reinsurers Brace for the Wild World of COVID‑19 Variants
When the Omicron wave hits the headlines, the insurance world knows it’s already a long‑term marathon. Rather than waiting on a vaccine update, risk modelers are building a “what‑if” playbook that’s as flexible as a yoga instructor on a hot yoga day.
AIR – “We’re Mining All Possibilities”
- Narges Dorratoltaj, a scientist at AIR, says the firm is juggling “more transmissible and less transmissible variants” on a spreadsheet that could overflow.
- “We can’t say for sure which path the virus will take,” Narges confides. “What we can do is approximate the range of possible outcomes so we can at least put a fence around the chaos.”
- Additional variables? AIR’s models now throw in the likelihood of periodic lockdowns, government policy shifts, and whether folks actually follow the rules.
RMS – “Our Model Plays Both Sides of the Vaccine”
- RMS updated its Covid‑19 projection to accommodate variants that display vaccine escape traits.
- Even more—variants that could dodge vaccines entirely. Think of it as a chess match where the checkers sometimes turn into chess pieces.
Swiss Re – “We’re Running 20,000+ Scenarios”
- The Swiss reinsurance giant’s pandemic model spans over 20 000 scenarios, covering everything from testing rates to final fatality data.
- They’re constantly feeding the model new data on infections, hospitalizations, and vaccination rates—real‑time updates that keep the model snugly in the present.
What This Means for Us
In short, insurers think of Covid‑19 like a storm that’s always brewing on the horizon. By staying one step ahead with varied “what‑ifs,” they’re hoping to weather any future flare‑ups without getting soaked. For the rest of us, it’s a reminder that while we’re still living it up with occasional mask‑downs, the risk‑management industry is ready to turn a pandemic into manageable numbers—one scenario at a time.
How long, what’s next?
When the World Says “The End Is Not Here Yet” – The COVID‑19 Chronicles 2024
Pfizer’s New Forecast
With the surge of the ultra‑transmissible Omicron variant, Pfizer has issued a sober warning: the pandemic may stay in full swing until at least 2024. No hype about “ending” the crisis, just a careful reminder that the virus is still quite the social butterfly.
AIR’s Five‑Year Survival Blueprint
- The model’s key take‑away: COVID‑19 could edge into endemic territory last for about five years.
- Excess deaths may persist, resembling a seasonal flu that keeps folks blowing up even when vaccines exist.
LIMRA’s Long‑Term (and Long‑Price‑long) Impact
“We’d see a medium‑term impact on claims lasting 5‑10 years,” explains Purushotham of LIMRA.
- More deaths and lingering illnesses mean insurers must build larger reserves.
- Those bigger reserves could translate into higher premiums for everyone.
Why the World Might Keep Throwing Curveballs
Experts warn that the combo of animal‑human transmission, nonstop global travel, mega‑city spikes, and climate mood‑shifts (think deforestation and mosquito buzz) could make pandemics as common as season‑ality.
Brice Jabo’s 10‑Year Outlook
RMS’s principal life‑risk modeller, Brice Jabo, feels the chill: “A new coronavirus outbreak is highly likely within the next decade.” He cites the SARS and MERS spooks of the past 20 years as harbingers.
- Which future coronaviruses could reach pandemic status? That hinges on how infectious they are and how strong our defenses stay.
Bruno Latourrette’s Optimistic Tune
Chief knowledge officer at SCOR Global Life, Bruno, thinks the next wave won’t hit as hard as COVID‑19.
“Covid was a perfect storm—pre‑symptomatic spread, moderate lethality that triggered outrage, immunity fade, and super‑high transmissibility.”
So, while vaccines keep us going, the global community has to brace itself for a prolonged, evolving saga, and insurers must keep their umbrellas ready for stiff winds.
