COVID-19 has swelled the number of life insurance claims in 2020 compared with 2019, the Canadian Institute of Actuaries (CIA) confirms in its Report 3: Canadian Insurance Industry Monthly Aggregate Data Analysis, released in June 2021.

The report states that deaths in 2020 surpassed the 2019 level. What’s more, the number of COVID-19-related life insurance claims peaked at 899 in April 2020. May saw the second highest number of fatalities among the insured population, with 724 COVID-19-related death claims, and December ranked third, with 630 fatalities.

In April 2020, individual death benefits paid due to COVID-19 peaked at $44.4 million (M). December was the second highest month, totalling $30.1 million in COVID-19-related death benefits, and May placed third, with $27.1 million in benefits paid.

Group insurance paints a different picture. “Group claims in 2020 are generally consistent with the level of claims in 2019, at least in the first half of the year,” the CIA report notes.

CIA adds that COVID claim volume in group insurance did not soar as high as that of individual insurance. However, the authors note a more persistent pattern of COVID claims in group insurance, even during periods of lower overall infection rates. “Specifically, there were 83 COVID-19 group insurance claims compared to only 69 COVID-19 individual claims for the two months of July and August 2020.”

Rose every month but one 

“The level of individual life insurance claims in almost every month of 2020 was increased when compared to same month in 2019," the CIA data indicate. The only exception was July 2020, a time when the impact of the pandemic was limited, the report states. 

For the year 2020, the 13 insurers who participated in the study reported a total of 3,179 individual claims “identified with COVID-19 as cause of death." In group insurance, the corresponding total was 754.

Data in the appendix of the report show a total of 100,800 individual life insurance claims in 2020 for all causes of death combined. In group insurance, total claims were 38,200.

The CIA analyses show that COVID-19-related claims accounted for about 10 percent of individual claims in December 2020. In addition, December 2020 claims fell slightly short of the peaks in April and May 2020. However, this is a significant increase from the low of less than 1 percent in August 2020.

Thirteen insurers contributed to the study: Canada Life, Manulife, Sun Life, The Co-operators, Foresters, RBC Insurance, SSQ Insurance, Industrial Alliance, Assumption Life, Equitable Life, Humania Insurance, La Capitale and Wawanesa Mutual Insurance Company.

Of these companies, 11 also provided group insurance data. In addition, 12 of the 13 insurers separated monthly COVID-related life insurance benefits from other benefits.

Number underestimated?  

The report presents higher individual insurance benefit amounts in 2019 for the months of January through March 2020, although very few claims were attributed to COVID-19 during this period. “It is conceivable that life insurance claims in the early months of 2020 were impacted by COVID-19 even though the specific cause of death was not recorded," the report points out.

Marc Tardif, former president of the Canadian Institute of Actuaries and chair of the International Actuarial Association (IAA) Mortality Forum, told Insurance Portal that the number of deaths related to COVID-19 may be underestimated due to deaths from unknown causes.

The CIA wanted to compare the effect of COVID-19 on mortality in the insured population versus the general population, Tardif adds. “Most deaths occurred in the 70+ or even the 80+ age cohort,” he notes, based on observations of the populations of Québec and Ontario. “Were people in this age group as insured as the Canadian population on average? Is there a trend for people this age to let their life insurance policies lapse? We wanted to see if the COVID effect was the same in both populations.”

Tardif suspects that the number of deaths related to COVID-19 may be proportionately higher in the overall population than in the insured population.

COVID-19 stamps out the flu  

Despite possible underestimation, the impact of COVID-19 is undeniable, he says. “Deaths in 2020 are much higher than the five-year average (2015-2019): we think the excess deaths in April 2020 would likely all be related to COVID-19,” Tardif adds.

He cited the results of mortality studies conducted in England that found that 2019 had been a "bad year," due to a higher number of deaths than normal. These studies find that the excess mortality had occurred more in the winter. “This may imply that the flu vaccine was not effective,” says Tardif.

He expected a low mortality year in 2020, because of the lack of influenza cases. “If not for COVID-19, we were on a roll in 2020.”

He adds that he hopes COVID-19 variants do not defeat future vaccines. “COVID-19 is an amplified version of the flu. Some fear it will become endemic. We hope to have vaccines every year that get us through. We also hope to find an effective treatment for this disease," he says.

Third leading cause of death  

Marc Tardif mentions that the leading causes of death in the insured population are heart disease followed by cancer. As for the general population, he cites an article that appeared on the American website KHN.org. Compared with the most recent 2019 data, the number of coronavirus-related deaths was 528,603 on March 11, 2021, the publication date of the article.

This made COVID-19 the third leading cause of death in the United States, ahead of accidents and trailing behind cancer. Heart disease remained the leading cause of death, accounting for more than 650,000 deaths, as the article shows in a chart.

Impact of treatment delays  

The fact that treatments and operations were postponed due to COVID-19 will weigh on the results of the next few years, Marc Tardif continues. “We expect to see some effects of the delays in the insured population. For example, lack of treatment for cancer or treatment that was not provided early enough will likely increase the number of deaths in the coming years,” he says.

Actuaries keeping a margin  

Actuaries had grown accustomed to a downward trend in life insurance mortality assumptions. They will have to plan for a blip in the near term, he adds. “In the last 20 years, we've seen a steady improvement in life expectancy in the insured population and in the general population.”

However, Marc Tardif does not think actuaries will have to revise their mortality assumptions or life insurance prices. “Actuaries will probably use margins for adverse deviations because of the uncertainty. The greater the uncertainty, the higher the deviation. To protect themselves, insurers will use capital rather than raise prices. We are in a competitive market. The market will call the shots,” he adds.

These additional deviations could be short-lived. “If the deaths related to the coronavirus are controlled, we should be able to remove the COVID-19 effect when calibrating what we can expect for 2021, 2022, and 2023,” Tardif says.

However, removing that effect will depend on several factors, he adds. “Now that most people are doubly vaccinated and the vaccines appear to be effective, how do we project the future? Will there be a fourth wave? Will the vaccines be able to counter the variants?”

Other reports to come  

Additional reports are planned. "The CIA is committed to this ongoing data collection to help Canada’s decision-makers manage the future impacts of the pandemic on the industry, mitigate risks, and ensure financial stability,” says Keith Walter, FCIA, Chair of the CIA Research Council.

“Since the second wave of COVID-19 in Canada continued into January and February 2021, the next quarterly report will show its further impact," the CIA says.

Increasingly accurate data  

Eleven insurers provided life insurance claims data by “actual date of death,” the Canadian Institute of Actuaries report explains. The remaining two insurers provided claims data by "reported date of death.” 

This detail is important to the authors of the CIA report. “Although this reporting based on actual date of death results in changes in reporting of claims by month as more data are reported, it provides a better analysis of the impact of the pandemic over time.”

Marc Tardif points out that the report includes data from 13 Canadian companies, compared with eight companies that contributed to the Institute’s last regular mortality study.