By Steve Bocking, FCIA, and Marie-Andrée Boucher, FCIA, respective Vice-Chair and Chair of the Committee on Life Insurance Financial Reporting (CLIFR)
The experience related to the impact of COVID-19 on insured mortality is very preliminary and is just starting to emerge. In the absence of more robust information and data, here are a few considerations related to mortality assumptions:
- Several life and health insurance companies have increased the use of accelerated underwriting. This practice allows them to continue to issue products to a greater portion of the population in a time of social distancing when things like fluids and paramedicals cannot be obtained. Actuaries would be mindful of the potential impacts associated with this modified form of underwriting on the mortality assumption. Paragraph 2350.06 of the Standards of Practice (SoP) and Section 610 of the educational note on expected mortality would be good refreshers for actuaries on the topic of underwriting and insured mortality.
- The presence of pre-existing conditions and co-morbidities may impact the mortality rate for those who contract the virus. This leads to the following considerations:
- Will the level of underwriting influence the extent of the impact on the mortality rates? If so, will this lead to a lower impact for shorter-term products like Term when compared to longer term products like Universal Life?
- Will rated business due to these conditions experience a more adverse impact than standard or preferred issues?
- The increased mortality rates observed during COVID-19 may be partly attributable to an acceleration of claim payments that may have already been expected to occur within the near future. This could translate into a beneficial impact on the mortality rates post-crisis. Will the post-COVID cohorts of business have better mortality than the pre-COVID cohorts as the more at-risk individuals succumb to the virus?
- The implementation of confinement and social distancing measures restricts the mobility and activity of individuals. Will this lead to lower mortality rates due to accidental deaths during this time? If so, the length of the confinement period and any permanent impact on social behaviours may influence mortality rates.
- The concerns over the potential stress that COVID-19 may place on the health care system has led to delays in other medical procedures. Individuals may also be worried about contracting COVID-19 or may not want to be a further burden to the health care system, so they may delay going to the hospital or seeing a doctor. This leads to the following questions:
- Will we experience increased mortality rates related to other causes of death (cancer, chronic diseases, etc.) in the upcoming years as treatments and surgeries are postponed during COVID-19?
- Will there be collateral impacts related to the emphasis placed on containing COVID-19 which may have a detrimental effect on individuals suffering from other medical conditions?
- Will the efforts associated with detecting illnesses and other life-threatening conditions be diminished during the crisis?
- The impact of treatment methods (e.g., anti-virals) and the potential of a vaccine are still highly uncertain at this point. As we’ve seen in past events, the impact of treatment methods can materially influence the mortality rates that we will ultimately see. How quickly will the impact of COVID-19 on mortality rates subside over time?
Although there are more questions than answers at this point, these are a few considerations that actuaries would be encouraged to analyze and review as they assess the continued appropriateness of their mortality assumption.
The CIA is also actively working with insurers within the Canadian marketplace to collect data related to COVID-19. They are currently looking to collect data on insured life mortality . Please stay tuned for updates on this front.
CIA publications pertaining to the mortality assumption
Actuaries are encouraged to review the following excerpts of these CIA publications:
- Paragraphs 2350.06 to 2350.14 that relate to insured life mortality and annuitant mortality within subsection 2350 of the Standards of Practice.
- Section 5.1 (Mortality risk) of the Considerations for the Development of a Pandemic Scenario research paper.
- Section 600 within the Expected Mortality: Fully Underwritten Canadian Individual Life Insurance Policies educational note that discusses the different adjustments that could be made to reflect factors anticipated to influence the mortality experience.
This article is part of a series of practice-specific articles under the Actuarial Guidance Council. Read the next article on pension plans by Jared Mickall.
