The future of life insurance in a post-Covid world
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Covid-19 has had a significant impact on the life insurance industry, with sharp increases in death and funeral claims, as well as income protection claims for people booked off work for a few weeks due to falling ill from contracting the virus.
“This has seen many insurers becoming more conservative in issuing new life cover and critical illness policies to older lives and those with co-morbidities until the industry has a clearer picture of the long-term effects of the virus,” says Leza Wells, Chief Product Actuary at FMI (a Division of Bidvest Life Ltd).
Speaking at an online event hosted by FMI this week, Wells said it was premature to say what effects Covid-19 would have on the cost of premiums in the future, as pricing actuaries are guided by medical experts on the potential risks of the pandemic. However, it was important to note that any price increases would be based entirely on future risks and not to cover any perceived shortfalls because of higher claims in recent months.
“At FMI, we are still assessing the longer-term impact of the pandemic in a number of areas, so it’s too early to say what the effects will be on premiums in the future. The vaccine rollout, and whether we can reach herd immunity and stamp out the illness together, will guide any decisions around price increases,” said Wells.
Also speaking at the event, FMI’s consulting Chief Medical Officer, Dr Peter Bond, said one of the major areas of uncertainty for insurers was so-called ‘long Covid’, where medical research is still unclear on the long-term effects of the illness on people’s health.
“The current data suggests that up to 25% of Covid sufferers will continue to have symptoms, or develop further symptoms four weeks after testing positive. This is naturally a concerning figure for insurers. We have less than two years’ experience of this complication of this pandemic, therefore it will be many more years before the full effect is known, which will then allow the insurance industry to adapt with a reasonable amount of confidence,” said Dr Bond.
Wells added, “Having Covid-19, or long Covid may affect the insurability of new applicants in the future and is the subject of ongoing research. Most insurers are now requesting a Covid recovery questionnaire, and a questionnaire by the treating doctor, for any new applications. Greater vaccination levels will allow us to return to normal, less cautious underwriting for death and critical illness benefit.”
However, no exclusions are being applied to FMI policyholders who have to make repeated claims against their income protection policies due to Covid-19 or ‘long Covid’.
Wells said the pandemic has highlighted the need for South Africans to include income protection in their life insurance portfolios. “Income protection provides security when you need it the most. It provides you with the peace of mind of knowing that you will be able to pay all your expenses such as other insurance policies, annuities, household expenses, and school fees, should you be unable to earn an income,” she said.