Can Life Insurers Handle the Surge in COVID-19 Death Claims?

The Financial Capability of Life Insurers

Triple-I chief economist Dr. Steven Weisbart asserts that life insurers can manage the additional death claims arising from COVID-19. As of now, approximately 90,000 Americans have died from COVID-19, with additional deaths seemingly excessive compared to previous years, suggesting an undercount. Assuming 300,000 additional deaths for 2020, and considering that not all would have individual life insurance, the potential claims could be around 150,000.

Historical Data and Industry Capacity

In 2018, beneficiaries under 2.7 million individual life insurance policies received death benefits. Even with the additional 150,000 claims, this would represent only a 5.6% increase over the baseline. Dr. Weisbart notes that this would result in total death benefits being paid to 2.85 million beneficiaries, similar to 2015 and well below the peak of 3.5 million in 2012.

Implications and Recommendations

The industry's ability to handle the surge in claims is a testament to its financial robustness. However, it's crucial for policyholders to ensure their coverage is adequate, especially given the uncertainties of the pandemic. Comparing data from the Insurance Information Institute, we see that while the number of claims has increased, the industry remains capable of meeting these obligations.