COVID-19 Life Insurance: What’s Really Happening? [Updated November 2021]

Most people around the globe are coming to accept how severe COVID-19 genuinely is. Since it’s spread via sputum, social gathering places, such as grocery stores, are filled with mask-wearing individuals — a rare site in everyday America. It’s safe to say that this virus forever changes our lives.  

However, what many of us are wondering is how all of this influences our economy. Will we experience another recession? Who will survive financially, and who won’t? Will there be anyone to bail us out? What part will the insurance industry play?

And more specifically, what part will life insurance play, and how is the life insurance industry being impacted by COVID-19?

How COVID-19 Is Impacting Life Insurance Now

Unlike other fragile and fast-paced industries, such as the restaurant business, most insurance carriers are tanks. They move slow and steadily. Think about the tortoise and the hare; we’re the tortoise, of course.

That said, it takes a lot to derail the insurance industry — but COVID-19 is “a lot.”

The good news is that, according to Insurance News Net, “it’s business as usual for insurance carriers.” Still, amid the coronavirus pandemic, things are changing in the way we complete tasks. For now, most of these changes are temporary, but you should know what’s honestly going on nevertheless.

Delayed Medical Exams

Generally, life insurance applications call for medicals exams to jumpstart the applicants’ policy. These off-site exams typically include a blood test, routine screening, urine analysis, physical examination, and detailed questions about family medical history.

Since COVID-19 is incredibly contagious, the high risk of sending a representative to examine a potentially infected individual is dissuading most insurance carriers against the idea of off-site exams. Instead, some carriers are forgoing medical exams altogether.

Longer Grace Period

Many times, insurers allow a 30-day grace period for insureds to renew their coverage. This approach gives people a chance to catch-up on tasks they’d previously placed on the back burner, such as renewing their policy.

That said, most life insurance policies don’t require an annual renewal as an auto or business plan would. However, insureds must keep up on their premium payments to prevent their life insurance policies from lapsing.

Because of the financial challenges that the coronavirus has created with furloughs, layoffs, and business closures, not to mention the social distancing guidelines, life insurance carriers are taking a new approach. Insurers are attempting to continue business operations through alternate models — telephone, emails, video chats, etc. — and aren’t disrupting or canceling service.

Slowed Medical Records

Doctor’s offices have never been known for the speed of delivering medical records to clients or other medical offices. Requests tend to take their sweet time, and for the most part, we’ve come to accept this fact.

However, the coronavirus pandemic has bottlenecked the delivery of medical records even more than usual. Since many offices don’t have what they consider non-essential office staff working, some tasks are taking longer than expected. In short, getting medical records is problematic.

Naturally, the delay in getting medical records is causing delays in processing life insurance applications, as well. Though, insurance carriers are finding ways to work around the issue, mostly by focussing on other portions of the application first.

More Profound Involvement

Some life insurance carriers across the globe, such as LIAM in Malaysia, are providing additional assistance to those who’ve been inflicted with COVID-19. And the extra relief measures couldn’t have come at a better time.

In Ghana, insurers have vowed to continue providing services to their patrons during the lockdown period. Not only will these measures provide individuals — customers, staff, and agents — with COVID-19 insurance coverage at no cost. Some are also waiving pandemic exclusions and the waiting period on policies if COVID-19 causes death.

Other ways insurers are bringing relief during the pandemic include:

Simplifying claims procedures
 Allowing their customers to use WhatsApp to file claims
Establishing dedicated claims teams
Enabling customers to purchase insurance digitally
Providing more training and incentives to agents

Sufficient Capital

All across the world, people are dying from this deadly new virus — with or without life insurance. Some individuals believe that the number of deaths will be too much for the insurance industry to handle. The fear is facing too many losses and too many claims without enough money for insurance payouts.

Although this pandemic is undoubtedly challenging the industry, it won’t beat it. Rest assured, insurance carriers worldwide have sufficient capital to “take a hit,” per se. According to ABS-CBN News, Benedicto Sison, CEO of Sun Life Financial Philippines and President of the Philippine Life Insurance Association said, “I am very confident in saying the life insurance industry is sufficiently capitalized to serve claims of this epidemic.” 

Life Insurance Landscape: What to Expect

COVID-19 has had the power to stop many individuals and businesses from continuing their daily routine. Lives and workflows have been severely disrupted in the U.S. and all over the world. So, it’s no surprise that many people are wondering whether the new coronavirus is a game-changer for the insurance industry.

The short answer is maybe.

Insurance expert and professor at Moore School of Business, Robert Hartwig, chimes in, “It’s unlikely that the current pandemic fundamentally restructures the insurance industry, at least in terms of property/liability and life insurance.”

Still, it’s worth examining how COVID-19 will influence the reshaping of the insurance industry.

Tightening of Guidelines

The insurance industry is a market based on risk. It weighs the vulnerabilities and then balances those exposures with sufficient underwriting guidelines, protecting itself against insolvency or shuttering. That said, it only makes sense for the industry to tighten up the guidelines because of the novel virus.

Keep in mind that those with current life insurance plans won’t see any changes to their active policy. However, a director with A.M. Best, Thomas Rosendale tells Forbes that he “expects carriers to implement underwriting procedures designed to identify applicants who have either contracted or been exposed to the COVID-19 virus.”

Some experts say to move quickly and get a policy now before qualifications become more stringent and premiums increase to accommodate a decline in financial markets. Others say to conduct your life as you regularly would.

We saw what fear and panic could motivate people to do — toilet paper, anyone? So, being scared into buying a random life insurance policy isn’t anyone’s idea of sound decision-making skills. A better approach would be to weigh your options alongside a knowledgeable insurance professional so that you land on the right life insurance plan for you and your family.

More Exclusion Riders

In other countries prone to viral epidemics, mostly those without adequate healthcare, pandemic exclusionary riders aren’t uncommon. After all, so much disease and death have the potential to skyrocket financial damage for insurance carriers. But let’s back up; an exclusionary rider is a carve-out on an insurance policy, barring that loss from being covered.

Since the COVID-19 death toll has been so high, one rumor circulating is that some insurance carriers are considering adding exclusionary riders on new policies, preventing COVID-19 deaths from being covered. Erin Ardleigh, founder and president of Dynama Insurance, said, “I have not seen a policy that has a carve-out or an exclusion for a pandemic.” However, she did recommend reviewing life insurance plans and beefing up coverage if necessary.

Even Policy Genius brings some comfort to this matter, “While some life insurance policies have exclusions for specific causes of death — like if you were to die while doing a high-risk activity or in an act of war, there is no pandemic exclusion for life insurance.”

Paused Policy Issuance

Much like the rest of the business world, insurance carriers aren’t entirely sure how to handle the COVID-19 crisis. As mentioned, the insurance industry works by assessing risk — but the virus is so new that there isn’t a history of statistics to go by. What this means is that we insurance folks are playing a guessing game.

Some insurance carriers might pause policy issuance temporarily until they find their pandemic footing. Mostly, this will influence seniors and those individuals with current health issues. Carriers who do suspend life insurance acceptance will likely resume when a vaccine is available, or potentially sooner.

Overhaul of Risk Model

Lastly, a significant way that the COVID-19 crisis will impact the life insurance landscape is that it will change the way carriers evaluate and underwrite policies. Naturally, this approach will vary from carrier to carrier, forcing each insurer to rework their risk models with the limited COVID-19 data.

To sum up LSM Insurance predictions, some insurance carriers will take a more conservative approach by excluding individuals with respiratory pre-conditions. Also, other carriers will resort to outpricing specific groups — putting a hefty price tag on particular policies — to dissuade them from purchasing a plan from that carrier.

An Uptick in “Fluidless” Underwriting

With social distancing becoming the new norm, who’s to say how our everyday lives will look in six months or even a year. Insurance carriers aren’t counting on one-on-one encounters with strangers to be acceptable any time soon. As a result, previously required procedures, such as medical exams, are flying out the window.

In many cases, a new standard is replacing the old one: “fluidless” accelerated underwriting, which forgoes the traditional medical exam during the application process.

What Is “Fluidless” Accelerated Underwriting?

Some say that accelerated underwriting has been all the rage for quite some time, while others argue that it’s just now picking up traction. The funny thing is, both are true.

Fluidless accelerated underwriting has been around for years, but because of the troubling times, it’s quickly becoming a go-to for many insurance carriers. Mainly because of the option to fast-track applications to approval status.

This streamlined approach to underwriting gives applicants a chance at approval and coverage without the standard medical exam and lab. Hence the name “fluidless” — no pricks or pokes for this plan.

As imagined, approved applicants must fall within a particular face amount as well as age and underwriting class limitations. However, when it works out, it’s a win-win situation — and it works out frequently, too.

According to Life Insurance for Parents, below are some of the typical qualifications you might see to qualify for fluidless accelerated underwriting.