Covid Spurs Biggest Rise in Life-Insurance Payouts in a Century

Table of Contents Newsletter Sign-up Markets SHARE YOUR THOUGHTS The Covid-19 pandemic last year drove…

The Covid-19 pandemic last year drove the biggest increase in death benefits paid by U.S. life insurers since the 1918 influenza epidemic, an industry trade group said.

Death-benefit payments rose 15.4% in 2020 to $90.43 billion, mostly due to the pandemic, according to the American Council of Life Insurers. In 1918, payments surged 41%.

The hit to the insurance industry was less than expected early in the pandemic because many of the victims were older people who typically have smaller policies. The industry paid out $78.36 billion in 2019, and payouts have typically increased modestly each year.

Covid-19 also spurred the fastest rise in sales of insurance policies in 25 years, an industry research group said. Combined with good returns on some of insurers’ investments, industry assets increased 7.7% to $8.2 trillion in 2020, the ACLI’s figures show.

Don E. Lippencott,

a longtime agent for New York Life Insurance Co. on Long Island, said he aims to deliver death-benefit checks in person to clients. He couldn’t do that during the pandemic

“It was gut wrenching and excruciating,” Mr. Lippencott said. Twenty-three of his clients died in 2020, roughly double the 10 to 12 deaths he has experienced in other years, with 10 of the deaths tied to Covid-19.

The majority were in their 80s and 90s, and payouts ranged from $50,000 to $3 million, he said.

“You just sit here and cry,” he said of clients he had known for decades. In ordinary times, part of an agent’s role is “being there with these families,” but lockdown restrictions precluded that. “We couldn’t be there, we couldn’t go to funerals, we couldn’t deliver the checks in person,” he said.

It is unclear how many of the 385,343 deaths identified in 2020 by the U.S. Centers for Disease Control and Prevention as Covid-19 related were people who owned life insurance.

Last summer, some publicly traded life insurers reduced estimates of their exposure, as measured by payouts per 100,000 U.S. Covid-19 fatalities. This was because deaths were heavily concentrated among older people, who tend to have smaller policies than people still in the workforce, if they have coverage at all.

Working people often are covered under life-insurance programs offered as an employee benefit, and some buy individual policies as well to help cover their families’ expenses in the event of a premature death.

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The arrival of the Delta variant changed the dynamics somewhat, CDC figures show. While approximately 80% of Covid-related deaths in 2020 occurred among those 65 and older, this year 69% of deaths have been in the 65-and-older group, and 25% were 45 to 64.

Last month, the number of U.S. Covid-19 deaths recorded in 2021 surpassed the toll in 2020, according to federal data and Johns Hopkins University, bringing the total number of reported deaths to more than 770,800.

President Biden outlined U.S. plans for combating the Omicron variant, which include expanded access to booster shots for all adults, a mask mandate on public transportation and tightened rules for international travelers. Photo: Mandel Ngan/Agence France-Presse/Getty Images

In the 1918 flu pandemic, the number of U.S. deaths reached about 675,000, with mortality high in people younger than 5 years old, 20-40 years old, and 65 years and older, according to the CDC’s website.

The ACLI’s data show two other years, both in the 1920s, when year-over-year increases topped 15%, when there also were influenza epidemics, said

Andrew Melnyk,

the ACLI’s vice president of research and chief economist.

The current pandemic has been accompanied by robust sales of both life and annuity products, among other factors helping the industry weather the turmoil, according to ratings firm A.M. Best Co. in a report this week. Best said it had revised its outlook for the industry to “stable” from “negative.”

Industrywide, total new life-insurance premiums increased 18% for the first nine months of 2021, the largest growth recorded for nine months in 25 years, according to industry-funded research firm Limra.

The constant news about Covid-19 deaths “is not as visceral of a realization as it was last year, but people still have that thought of family members and close friends they lost,” said

Collis Temple,

a national sales director at

Primerica Inc.

So there remains motivation to buy life insurance that didn’t exist before the pandemic.

Primerica’s death claims for 2020 increased 15.8% to $1.7 billion compared with 2019, some of which the company attributes to Covid. Total face amount of policies issued increased 16% compared with 2019, while sales in this year’s third quarter “started to normalize toward pre-pandemic levels,” it said.

Write to Leslie Scism at [email protected]

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