The life insurance industry was forced to hand out more money in death-benefit payments in 2020, otherwise known as the start of the COVID-19 pandemic, than in any other single year—though 2021 has probably been worse, reports the Wall Street Journal. Death-benefit payments from US life insurers totalled $90.43 billion in 2020, for a 15.4% increase over the $78.36 billion paid out in 2019, according to the American Council of Life Insurers. That's the largest year-to-year increase since the influenza epidemic of 1918, when payments jumped 41%.
The difference has to do with the number of dead Americans (675,000 from influenza in 1918, compared to 385,343 from COVID-19 in 2020) and who they are. While the influenza epidemic killed plenty of children and working-age people in addition to those 65 and older, about 80% of deaths from COVID-19 in 2020 occurred in those 65 and older, who usually have smaller life insurance policies than working-age people, per the Journal. Some life insurers even reduced estimates of their exposure in 2020 once this was realized.
But 2021 has seen some changes. So far this year, 69% of deaths from COVID-19 have occurred in those 65 and older, while 25% have occurred in those 45 to 64, per the Journal. There have also been more deaths overall. John Hopkins University puts the 2021 total at more than 385,457 deaths as of Nov. 20. MetLife CEO Michel Khalaf said the company's 2021 COVID-19 death benefit payments had already exceeded 2020 payments as of a month ago, per ThinkAdvisor.
But firm AM Best Co. revised its industry outlook from "negative" to "stable" this week, as it reported robust sales in life and annuity products, per the Journal. US applications for life-insurance policies jumped 4% in 2020, for the highest year-over-year annual growth rate since MIB Group Inc. began tracking activity in 2001, the Journal previously reported. Industry assets increased 7.7% to $8.2 trillion in 2020, according to ACLI. Research firm Limra adds that total new life-insurance premiums were up 18% in the first nine months of 2021, for the largest growth recorded for a nine-month period in 25 years. (Read more life insurance stories.)