Originally Posted by
David.Lewis
There is a significant rise in mortality, but it also feels like there's some exaggeration and scare tactics going on to pump fear.
For example, the rise in claims was expected at many insurance companies. Insurer's were (mostly) not caught with their pants down. It's not like they were surprised by news of a pandemic or deaths from other causes like drug abuse (insurers are very aware of the drug abuse and depression problem in America). They priced this into their mortality predictions. But, I also get the strong impression that it was unexpected at some life insurers, particularly those who maybe played it a little fast and loose with their group life insurance plans.
Overall, mortality was up about 33% in 2021, and up 20% in 2020. The 40% figure was specifically sourced from One America, and then everyone ran with it as "the number". There are 2 major lines of life insurance business in the U.S.: group and individual life insurance. This 33% figure is split between group and individual business. Some carriers do a lot of group business (One America). Other carriers have insignificant group business (Penn Mutual). Some have slanted splits which favor individual business and so would be impacted, but impacted differently than other carriers with larger group business (New York Life, which has about a 30/70 split between group and individual business). When I looked at 13 different insurers that all ran different kinds of life insurance companies, a clear pattern emerged. Except for one insurer that saw a dramatic decline in death claims (and fell well-below the average), insurers saw an increase in death claims.
The other side of this story is the false doomsday narrative that there is a mortality crisis in the industry set to wipe everyone out. To get a sense of what's really going on in the industry, ignore the smaller players who might (or might not) be taking outsized risks on their book of business, and look at the mega life insurers like Northwestern Mutual and New York Life who run fairly straightforward life insurance businesses. Northwestern is massive and represents the classic old school life insurance business. In 2021, their death claims amounted to $3.965 billion against $17.7 billion in policy benefits and increases in policy reserves. Even if you just look at premium income, they took in roughly $16 billion in premiums and paid $3.965 billion in death benefits. A similar story plays out at the smaller, more aggressive, life insurers like Penn Mutual. Mortality is not not approaching any level which would threaten these companies' solvency.
As for total mortality in the U.S., the provisional death counts don't seem to indicate anything crazy going on. Death counts from all causes are *slightly* higher in 2021 compared to 2020, not 40% higher.