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Insurance of any kind is based on or influenced by an individual's risk, which is quantified based on probabilities built into the pricing process. While life insurers have good experience in applying such probabilities to established illnesses and incapacitations, Covid-19 stands as something of an outlier. We know that almost everyone is vulnerable to infection – some simply shrug it off and others have symptoms that require hospitalisation.
We also know that certain risk factors make the virus more dangerous like advancing age and the presence of comorbidities, particularly diabetes. But even as there are now multiple vaccines against Covid-19, we cannot know how the virus might affect us in long run. This novel coronavirus is still too “novel” for insurers to quantify and price appropriately.
Each insurer is guided here by their internal risk underwriting procedures. Globally, most insurers have not increased their policy premiums or decreased their policy benefits, even though there are predictions that the pandemic may decrease average life expectancy if infection prevalence rates do not remain below 1-2% . Only a handful of low-price leaders in global life insurance raised their premiums for older clients (60 years+) to account for this risk. But as we learn more about the coronavirus, most insurers may have to revise their pricing assumptions.
Years, perhaps decades, down the line, the symptoms of long Covid – chronic fatigue, brain fog, headaches, mental health issues and muscle pain – or behaviour changes due to compulsory public compliance may impact a client’s ability to work and be productive. However, the pressure of this residual risk on repricing of new insurance policies may be muted by the effect that some vaccines seem to ease the severity and duration of long Covid according to emerging research.
Life and health insurance has always quantified and differentiated the price for health conditions and lifestyle choices that reduce one's life expectancy. Then there is the question of vaccinations and whether there is a substantial risk differential between those who take the vaccine and those who refuse it (or lack access to it). For now, it is too early to tell whether the unvaccinated will struggle to find an insurer willing to cover them without a premium loading or a special condition on their policy that excludes death due to coronavirus complications. Policies may also need to be “reactivated” each year by taking a Covid booster injection as the virus mutates and evolves, or as new variants emerge. These are all speculations, of course, but they highlight some of the questions that insurers will be asking themselves. My own position is that while I strongly support the call to vaccinate, I do not think insurers should penalise existing clients for refusing one. These kinds of risk and pricing questions only make sense at an application stage and should not be used to justify adjustments to policies already in effect as we saw previously with HIV.
What is key, and what I hope we can achieve, is helping the public act on reliable information. That means challenging claims that approved vaccines have gone to market too quickly to be reliable when knowing they have passed the requirements for emergency-use authorisation and have been fast-tracked off the back of the extensive research and funding, plus a global cooperation and prioritisation by scientists and manufacturers. Learnings and clinical trialling from the 2002 SARS outbreak also provided useful groundwork. The number of allergic reactions or blood clots cases due to some vaccines are statistically small compared to the hundreds of millions of people who have received these vaccines without serious complications and who now have substantial protection against the virus.
Much like the existence of long Covid, the impact of Covid-19 on the life insurance industry may cast a long shadow in the years to come as we readjust to what it means to live in a Covid world. However, we can rest assured that the most challenging part is likely to be behind us as more research emerges.
Investec Life Limited is an authorised Financial Services Provider 47702.