The Cost of COVID: How has the Pandemic Impacted Life Insurance? 

It’s fair to assume that COVID-19 has affected everyone’s life this year in one way or another. For some the pandemic has brought financial difficulty and stress, whilst others have faced health risks as a result of contracting the virus. As we move closer towards the end of a turbulent year and the hope that a new vaccine will bring a fresh start to 2021, people are beginning to plan for the future again. In this article we’ll give you the lowdown on how the virus has changed underwriting and what to expect from providers in the future.

Now more than ever people are now realising the importance and security of life insurance. Despite the reduced earnings and economic hit, people’s attitudes have changed towards the type of cover they are buying. Focus has shifted from finding the cheapest cover to the right cover. For many people life insurance is becoming more than just an option to take out with a mortgage and is instead earning the same importance as home insurance.  However, some may have reservations on whether insurers will still be paying out in COVID related cases or what future applications will entail.

From an insurer’s perspective underwriting has taken a shift to include COVID related questions in the application forms, such as:

 

  • Have you tested positive for COVID within the last month?
  • Been advised to self-isolate at any time?
  • Had any symptoms of coronavirus?
  • Been in direct contact with anyone who has been diagnosed with or who is suspected of having coronavirus?

 

Reassuringly, life policies will cover COVID whether this be for existing policies or new applications. However, there is the stipulation that this will only be the case with individuals that have honestly answer all pre-underwriting questions in their application. Insurers will also ask to be made aware whether the individual has recently travelled to any foreign countries where the virus has higher infection rates. A Report in August from the Association of British Insurers (ABI) reported £90 million had been paid out for COVID related deaths, with over 7000 claims received over a 3-month period in the height of the pandemic. The report also found that the majority of these were individual policies rather than under a group / work scheme.

Zurich Insurance Group released their figures from H1 2020 which showed that they paid out over £154.2m in life insurance claims over the period, compared to £140m in 2019. They also said that over £15m worth of COVID related claims were made on life insurance policies and more than £4.5m already paid out to families for COVID related claims.

 

We also spoke to Ben Frost, owner of ‘That’s Life Insurance’ who shared his thoughts on the impact of COVID in the insurance market. Describing the pandemic as a ‘catalyst’, he said that COVID has prompted people who were delaying the process to now take out a policy. From the perspective of insurance providers, he mentioned that ‘intermediaries have been regularly updated on respective policy changes’ with the introduction of GP video appointments and additional questioning on application forms. He also highlighted that ‘2004 was the best year on record for life insurance with 1.8 million new term assurance policies and 737,000 critical illness policies taken out’. These figures were driven by both the SARS (2003) and Bird Flu (2004) pandemic which reached a global threat level. Looking ahead Frost suggested that we could consider these events as ‘an indicator to the potential impact to the industry following Covid19, which projects a significant increase in new policy sale volume’.

 

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