An Indiana life insurer has made some news earlier this week when they reported their claims experience for the second half of 2021. Life insurers pay out claims when people die. People usually die fairly predictably on the basis of age, gender, previous medical history and geography. Spikes are either due to one-off catastrophic events (plane crashes) or something weird and notable.
The head of Indianapolis-based insurance company OneAmerica said the death rate is up a stunning 40% from pre-pandemic levels among working-age people…
Davison said the increase in deaths represents “huge, huge numbers,” and that’s it’s not elderly people who are dying, but “primarily working-age people 18 to 64” who are the employees of companies that have group life insurance plans through OneAmerica.
“And what we saw just in third quarter, we’re seeing it continue into fourth quarter, is that death rates are up 40% over what they were pre-pandemic,” he said.
“Just to give you an idea of how bad that is, a three-sigma or a one-in-200-year catastrophe would be 10% increase over pre-pandemic,” he said. “So 40% is just unheard of.”
Most of the claims for deaths being filed are not classified as COVID-19 deaths, Davison said
A couple of points need to be made.
This is reflected of the Delta wave and not Omnicron.
Death categorization is a very inexact science. Death determination is often made by coroners. Coroners are often elected positions with frequently low to no training requirements. Reporting to the CDC for inclusion in the WONDER database is slow in pre-COVID times (the dataset is good through 2020 at this time).
However life insurers have a far simpler problem. They pay out a claim on a verified death of a covered life. They fundamentally care about dead/not dead as the unit of meaning. Further details are needed to verify that the coverage actually applies to the claimed death, but the fundamental questions are simple: Active policy? dead or alive?
Life insurance companies don’t care that some county coroners “doesn’t do COVID deaths.” Their actuaries know that they are paying a lot of claims for a population that tends to not have a lot of deaths leading to claims. Much like climate change, insurers will respond to the evidence in front of their actuaries’ noses that something big is happening that will cost them a lot of money if new trends continue.
lowtechcyclist
Not only does it not matter how the deaths are classified, it doesn’t matter what the cause was. It can be Covid, it can be something totally unrelated like a car crash, or it can be a technically non-Covid death that resulted indirectly from the pandemic: people who couldn’t get care for their heart condition in time, people who responded to increased isolation by taking more drugs resulting in an overdose death, whatever.
For the insurer, it all comes down to those excess deaths for that age range. And the rest of us can assume that one way or another, the excess deaths were Covid-related, whether or not Covid was the direct cause of death.
A 40% increase in the 18-64 age group is one hell of a spike. For comparison, according to this article, U.S. deaths increased about 17.7% from 2019 to 2020, and that included all age groups.
Anyway
Can’t find the link now but saw that drug overdoses in 18-55 age group spiked in 2021
Wvng
A doctor friend told me last year we should expect to see a LOT of long term disability from covid survivors. The info at the link backs that up.
Ken
I’ve been expecting for the insurers to act; as you say, this is costing them money. Some commenters on BJ have suggested they could raise rates for the uninsured, is that allowed for individual health policies under the ACA?
I would guess they are less restricted in group policies (“sorry, unless your company institutes a vaccine mandate, you will not be able to buy group insurance from us”), is that the case?
I would also think they can refuse to issue life insurance to anyone, including because of vaccination status.
Betty Cracker
Actuaries and underwriters will impose truths in the form of larger bills or inability to get coverage, no matter how well insulated people are from facts. Example: our homeowners insurance has increased 100% annually for three years in a row even though we’re not in a primary evacuation zone and have never filed a claim. FL governors can pretend climate change isn’t a thing, and their supporters may believe them, but the data is what it is.
David Anderson
@Ken: Fully insured health insurance (ACA, Medicare Advantage, some small group) can not rate on previous medical history inclusive of vaccine status. Employer sponsored insurance where the employer is the risk holder can institute “wellness programs” that allow for differential premium ratings based on vaccination status but not on previous history of COVID infection.
I expect premiums to be differentially offered for Long Term Care and Life products that can aggressively rate on almost anything that the actuaries are convinced is predictive.
Bob Hertz
I agree that this is disturbing. Group life insurance normally covers a broad range of young and old employees, healthy and sick ones, etc. Anyone who wants extra coverage must go through underwriting.
I wonder if One America has a concentration in certain industries. Maybe the companies with a lot of in-person emloyees have had more deaths. I wonder if the industry giants are also seeing more claims.
What Have the Romans Ever Done for Us?
The issue for insurance companies is actuaries work off the past and extrapolate into the future. In “normal” times that works but the twin catastrophes of climate change and the pandemic is throwing everything way off.
About 20 years ago I worked for a small environmental non-profit – it was a single issue organization dedicated to promoting a revenue-neutral carbon tax to address climate change. Basically we pitched reducing corporate and personal income or payroll taxes and replacing some of those taxes with a carbon tax that would raise the same amount of revenue. Or, more precisely, we were proposing setting the carbon tax at the social cost of carbon and then reducing either income or payroll taxes by that amount.
It’s a societal welfare improving proposition, and certain industries, including the insurance industry, would have made out very well under the policy because they are not carbon-intensive and so their income tax cut would have exceeded what they paid out in carbon taxes, and because it would have reduced carbon emissions over the past 20 years and hence their climate change related losses would be lower. But they were too worried about pissing off major clients who were dedicated to the proposition that climate change was a hoax so they wouldn’t sign on to advocate for the policy.
The pandemic situation will eventually reach a new normal for the life insurance industry but the actuaries that cover homeowner insurance claims and such are never going to catch up to the implications of climate change on premiums in real time. They’re going to lose a lot of money, and they should have been smart enough to figure that out 20 years ago and lobby for a policy that would have helped reduce their losses. But they didn’t.
Ken
@Bob Hertz: I would like to see a state-by-state breakdown of the death rate increases. I don’t really expect it to tell us anything we don’t already know (hi, Dakotas!) but it would be useful to have the table for reference.
KMF
@Ken: The best data set comes from the CDC – here is all cause mortality with the ability to filter by state. https://www.cdc.gov/nchs/nvss/vsrr/covid19/excess_deaths.htm
If that doesn’t have enough detail for your question, there is probably a wait for the data.
Once the US Wonder database catches up to 2021 there will be some folks with access who distill it into readable graphs and bites of data.
Downpuppy
@Ken: How about county level?
(USA Today project)
VOR
IIRC, Hurricane Maria only killed something like 64 people directly when it struck Puerto Rico. But studies showed around 3000 (give or take) excess deaths in the time period after the hurricane. Similarly, there are deaths from a pandemic which aren’t directly caused by the disease itself.
What’s striking in this statistic is the 18-64 age range. One of the myths around COVID is that it only kills the elderly, despite ample anecdotes and evidence. But the facts seem to indicate otherwise.
smith
The pandemic may have accelerated a trend that was already in motion before covid: A huge increase in “deaths of despair” among a particular segment of the population. These deaths have been growing since the 1990s and had already reduced life expectancy in this group before covid came along. Deaths of despair include drug overdoses, deaths from alcoholism, and suicides, and possibly car crashes and other accidents occurring when people are impaired. The most susceptible population appears to be white, non-hispanic, middle-aged, with no more than a high school education. I’m guessing this description would apply to a lot of the population represented in the spike in deaths described above, but also to a lot of Trumpers, anti-maskers, and anti-vaxxers. Combine a tendency toward deaths of despair with greatly increased vulnerability to a potentially fatal disease, and you’d expect just what we’re seeing. Just look at the typical recipient of a Herman Cain Award.
Áine Yore
Actually most causes of death are filled out by doctors – and even we are often guessing about the cause of death. And yes there are plenty of ideological docs out there who don’t want to put Covid as a cause of death.
background if you’re interested: if the mode of death is homicide, suicide or accident, that’s an automatic medical examiners/coroners case and they determine the cause of death. If it’s a natural death with a reasonable guess as to the cause then the attending doctor fills out the certificate with their “best guess” as to the cause. In rare cases with a weird or truly unexplained cause the M.E. may take that case for an autopsy but that really is quite rare. There is some state by state variation but this is the typical process. Source: am ER doctor.
JustRuss
I hereby move that hence forward the “t” in “mortality” be capitalized to avoid confusion. Thank you.
catclub
@JustRuss: Growth hormone: morTALLity
catclub
It looks like the death rate reported may be less bad than the overall death rates for the population group, because the insurer is noting the death rate among insured people. Employed people are probably healthier than average.
Mary Kennedy
@Wvng:
And there are RWNJs reporting that the reason for that is that the vaccine is causing death and disability, but there’s a media-government-pharma conspiracy to keep it a big secret.
Bob Hertz
I have to disagree with Mr Smith on the influence of “deaths of despair.”
I used to sell group life insurance, and almost all carriers focused on white collar companies with well-educated white collar work forces.
Yes, a few huge corporations like Walmart would have low-face amount policies for blue collar workers — but sadly enough, the deaths-of-despair demographic generally does not even work for Walmart.