RE: 40% increase in death claims
Quote:
Originally Posted by
Shiva Kaul
I don’t have a ton of information about this just yet. Waiting for more details. But, in a previous post, I linked to something where MetLife was reporting higher than normal death claims and would have to reprice its group life insurance product…. and now One America.
I asked a product dev guy I know what might be happening here, so I don’t want to stick my neck out too far at this point before getting the full story. However, I’ve been an insurance agent for long enough that I feel comfortable speculating on some plausible scenarios. Again, I don’t know that this is actually what’s happening, but this is what makes sense to me at this point:
First, there is a world of difference between MetLife and One America. Met is a mammoth public company and OA is a much smaller mutual life insurance company. They are one of the smaller mutuals at that. Not that that’s bad, but it is interesting that it would affect things across the board like that—both large and small companies. That rules out the “small guy is taking outsized risks and paid the price” argument.
The other difference is, at this point, it appears to be the group life insurance market and not the individual life insurance market. The last conference call I was on with product devs and the marketing folks, they were discussing mortality experience being in line with projected death rates. This was for individual life insurance.
Group insurance is a different animal (it is the insurance you buy through your employer).
Generally speaking, individual policies are fully medically underwritten. Meaning, you must qualify before the insurer offers you a policy. If you’re terminal, you don’t qualify. If you have a serious health issue, the insurer rates you as a substandard risk and you pay a flat extra premium for the privilege of being insured.
Group policies are not like that. You can be in very poor health and still get the $50,000 from your employer’s group plan and everyone in the group pays the same rate. There’s no real medical underwriting. This is how a lot of folks get insured when they otherwise might pay more or not be covered at all. And, life insurance is not like other forms of insurance. It is not an indemnity contract. It is a valued contract—there is no insurance adjuster to whittle the amount down. The contact is valued at whatever the death benefit amount is at time of death. To me, it seems like a risky bet for insurers but lots of insurers have carved out a niche in the employer benefits market to capitalize on it. Maybe this will be the convincing moment that this is not such a great risk to be taking…
If working-aged folks are dying at an unusually high rate, and primarily not from COVID, then this may be the beginning of the downstream effects of the government's command-and-control tactics. A 40% increase is a huge spike in death claims, and if this is being accurately reported then this is very serious.
We know that most of the death claims are not from COVID, so that leaves non-COVID mortality which, at this point, can be a wide range of causes. One America has already said they’re passing the expenses on to the group, which is what keeps the plan from blowing up in the insurer’s face (mostly). I would be surprised if other companies didn’t follow suit. Still, with such dramatic rise in deaths, it's hard to imagine this won't affect insurer profits. Maybe this is when premiums start to rise again.