How is the Covid-19 crisis impacting the Life Insurance industry in USA?
The COVID-19 crisis is hitting hard every sector of life. However, some industries like health care and life insurance are experiencing unexpected growth in their demand. Across the USA, more and more individuals are applying for the life insurance policies since late February 2020 which is still on a high end even after months of the coronavirus being around. Consequently, life insurance agencies had to revisit their policy guidelines. This is because life expectancy has dropped for obvious reasons.
Since life insurance pays a lump sum amount if a person dies, people who are in debt, have children, dependents or other financial difficulties apply for life insurance policies.
A Surge In Life Insurance Policy Demand Observed
In the current scenario; as Nicholas Mancuso, a life insurance expert and senior operations manager at an insurance broker site said: “We’ve definitely seen a strong uptick in consumers calling to ask about coronavirus, whether they’ve worked with us before or are completely new to life insurance”. He continued “We’re getting a good amount of questions from consumers regarding how the process works to get underwritten for life insurance currently with coronavirus, whether or not it’s excluded, and about the precautions that examiners are going to take when they come out to see them”. He also explained that the number of applicants has increased since early March after the virus surfaced in USA.
Coronavirus Acting As A Catalyst For Many
Many individuals who kept putting off buying a life insurance policy earlier are now moved and more interested in buying a policy to provide their families with a financial safety net. This is one of the reasons why the demand has increased overall in the time of this pandemic.
Insurance Companies Keeping The Premiums And Prices Same As Before
Insurance companies have vastly kept their premiums and prices the same as before which makes buying the policies as affordable as they previously were.
Some Companies Growing Stringent In Selling Term Life Insurance
Although most types of life insurance policies are still the same, however, the term life insurance that is a ‘life insurance policy valid for a set number of years’ is experiencing a stricter selling policy with regards to the application process.
- Individuals with a travel history are seen as at a health-risk by the insurance companies. Therefore, their applications are being postponed for at least 30 days.
- Also, many companies are denying the term life insurance policy and other similar policies to people over 70 years of age since they are at a higher risk by the spread of COVID-19.
Permanent/Whole Life Insurance Policy May See A Price Surge
According to the Business Insider, ‘permanent insurance policies, also called whole life insurance, may see prices increase, term life insurance prices should stay the same.’ This is because the overall life expectancy has decreased due to the health-risk by Coronavirus.
Inability To Pay The Premiums – Risk Of Surrendering A Policy
Since many people are now experiencing a lag in their usual stream of income due to the slowed markets/industries and growing unemployment worldwide, the ability to pay a monthly premium or to afford a life insurance policy is getting difficult for many in the lower-income groups.
Need for Educating About the Alternatives of Life Insurance
Many among them might be planning to either surrender their policy or stop paying a premium and end up exiting the policy by default. However, Henry Montag, Principal of The TOLI Center East suggests insurance agents educate their clients about the alternative exit strategy called life settlement. ‘A life settlement is the selling of one’s life insurance policy to a third party for a one-time cash payment.’- (Investopedia).
This may help people find a better exit strategy from their insurance policy and improve their financial prospects.