Strong balance sheets and diversified products and portfolios helped the Canadian life insurance industry financially during both COVID-19 and the recent market turmoil, according to a report by the Canadian Institute of Actuaries (CIA).
In the final of a six-part report of the impact of COVID deaths on the Canadian life insurance industry, Nicolas Genois, FCIA, Chair of the CIA’s Experience Research Committee and the report’s author, said despite the impact of individual life insurance claims during COVID, life insurers in this country remain healthy.
COVID death claims
According to the report, at the peak of the first wave of COVID-19 in April 2020, COVID-related individual insurance claims represented 13 per cent of the total claims. In the second wave, COVID-related death claims reached 11 per cent of total individual claims in January 2021 and a high of 6.8 per cent for group insurance claims in the same month.
“The Omicron waves impacted life insurance claims to a lower extent, reaching a peak of 7.5 per cent in January 2022 for individual insurance and 3.5 per cent in February 2022 for group insurance,” said the report. “While data shows that claims decreased after the first quarter of 2022, a lag in the reporting of some claims is expected to cause the level of claims in the second quarter to increase.”
The report notes that there will probably be more waves of COVID-19 infections. However, the number of deaths and the impact on life insurance claims are expected to be lower than have been seen up until now.
Participating companies in the survey included Canada Life, Manulife, Sun Life, The Co-operators, Foresters, RBC, SSQ, Industrial Alliance, Assumption Life, Equitable Life, Humania Assurance, La Capitale and Wawanesa Mutual Insurance Company.
Individual and group policy payouts
Genois said individual policies paid out from March 2020 to March 2022 due to COVID deaths amounted to about $424 million for 7,000 claims, averaging about $60,000 each. The group side totalled $75 million for 2,400 claims, averaging about $30,000 each.
Group insurance covers those who were employed and because they were on the younger side, they were less likely to die from COVID and fewer payouts were made, he said.
The bottom line for Canadian life insurance providers was bolstered by the product side, specifically annuities, he said.
Stable financial results
Actuaries typically look at margins for adverse deviations, but strong balance sheets among Canadian insurers helped to maintain stable financial results, said Genois. “There was nothing major on the mortality risk side at all,” he said.
One risk the CIA didn’t think was correlated but in fact was, dealt with the double whammy of mortality risk and the downturn in the markets, he said. Equity risk was not covered in the report.
A major goal of the reports was to provide additional data that would help actuaries in their future work, such as what margins to use, what reinsurance arrangements to put in place and perhaps what projections to adjust.
“It’s tough to expect the unexpected, but issues may happen more often in the future so actuaries will have to consider those in their projection scenarios and product mix,” said Genois. “So I guess this was a good lesson learned on that front.”