Covid-19 Pandemic Effect on Life Insurance Sales

Pandemic Impact

With the covid-19 pandemic raging across the country, very few businesses have escaped its ravaging effects. Government officials acting on less than accurate and adequate data have had to make some tough calls as to how to respond to this pandemic. They have had to contend with the erroneous observation that this is just another flu strain we have to deal with from time to time. Yet with its aggressive nature and as statistics were gathered, it didn’t take long to see the death rate caused by the flu of .1% was far below the 5.2% death rate caused by the coronavirus. It also became apparent the flu death rate for those above age 65 of .83% was insignificant when compared to the coronavirus death rate of 10.4% from age 65 to 74, 20.8% for the 75-84 age group, and 30.1% for people over 85. 

(https://www.businessinsider.com/coronavirus-death-rate-as-compared-to-flu-by-age-2020/)

CDC Guidelines

The Center for Disease Control (CDC) has attempted to set some guidelines to help keep the public safe, with considerable pushback from those they are attempting to protect. Not knowing for sure what demographic groups were most likely to be adversely affected, draconian measures were implemented almost as soon as it was realized this ailment had the potential to be of pandemic size. Almost all airlines were shut down, schools ranging from kindergarten to college were required to stop holding public classes, businesses were classified as being essential while others were deemed nonessential, those having their day to day regimen altered drastically, interstate travel was greatly curtailed, sports arenas became ghostly quiet, and even religious services were affected by government decree. 

Carte blanche measures were used for both rural and urban settings–Montanas and residents of the badlands of North and South Dakota were expected to act just like a New Yorker or a Floridian. Masking and social distancing became the rallying response required by the CDC for a frightened society.

These measures were met with the headwind of resistance from people who were used to being given information and then allowed to make their own decisions of how they would respond to the situation. The old battle flag with the rattlesnake and wording “Don’t tread on me” became quite popular with the big hemi 4×4 pickup owners who displayed it waving from the bed of the pickup as they cruised through their hometowns. With the distrust in government officials in general and with the political polarization already part of the fabric of society, this backlash should have come as no surprise. 

Essential Business Designation

In all this disarray, the life insurance industry was deemed to be an essential business in all 50 States, but it would still have to conform to safety precautions being mandated by government edicts. They would need to meet the proper masking, social distancing, crowd sizing, proper marketing with limited door to door solicitation, and very restrictive in-office visits. Pennsylvania went so far as to call the insurance business a sustaining business but in-person sales were not designated as such and were said to possibly  hinder the safety and well-being of others. Therefore, any Pennsylvania agents who continued to sell insurance in-person ran the risk of losing their license. “Governor Wolf’s executive order went into effect March 19, at 8:00 pm. Violators will receive a letter of violation from the Pennsylvania Insurance Department with a copy being forwarded to Pennsylvania State Police for further processing”. https://www.pa.gov/ 

By Nov. 24, 2020, some PA counties reopened businesses under the green phase, while others were operating under red or yellow phases. https://www.pa.gov/guide

Complications of Governmental Pandemic Decisions

If there is one thing to come out of this pandemic it will be the method life insurance will be sold in the future. With a little tongue in cheek humor, the Smithsonian Institute can now erect a monument to the “come-to-your-home” insurance salesman. It is this author’s opinion that the life insurance industry will probably never return to the old tried and true method of selling and purchasing life insurance around the kitchen table.

Social distancing and masking along with technological advancements of electronic applications, electronic signatures, and electronic transfer of funds will obsolete the paper and pen method of consummating an insurance sale. Skyping and Zoom will become more of the norm as the purchasing public turns to them for gathering information and for making decisions on purchasing insurance. Very few sales will be completed in a single setting interview due to the sterile environment brought on by lack of personal contact and the inability of the salesman to control the selling process. There is just something about close proximity, body language, tone of voice, and eye contact that enhances the selling process. This will be long gone.

Affect on Mortality and life Expectancy Rates

As to how much the pandemic has and will affect mortality rates will yet need to be interpreted. When you understand that mortality rate is a measure of the number of deaths (in general or due to a specific cause) in a particular population per unit of time and usually expressed in units of deaths per 1,000 individuals per year, one can see why it is too early to quantify the impact.

It is also interesting to note the life expectancy in the USA in 2020 is 78.93 years, a 0.08% increase from 2019. Many statitisians are of the opinion this is due to the drop in suicide rates and drug related deaths. Just as a point of interest, when broken down by gender, male life expectancy is about 76 years and 2 months while female life expectancy is 81 years and 1 month. When these statisticians begin to interpret impact of Covid-19 on life expectancy, they are going to be hard pressed to interpret actual coronavirus deaths because of collateral deaths due to increased alcohol consumption, isolation, and suicide which are contributable to the virus itself. https://www.latimes.com/science/story/2020-01-29/

Individual Sales Response

With all this commotion in the marketplace, even with the lack of personal contact, life insurance volume has actually increased. The attention given every day to the number of confirmed cases and number of deaths related has prompted society to recognize its vulnerability to this pandemic. Even though we have more deaths by alcohol and drug related events, which we have just decided to accept as being normal, this pandemic seems to have struck the nerve center of our mortality. Purchasing has increased by 13% in the age group of consumers under 44, which is one of least affected groups in the pandemic; a 9% jump for age 45 through 59; and a 0.4% in the 60 plus category.

This spike seems to be in term products so it will be interesting to watch the retention rate for these newly purchased policies. Will they stay in effect after the panic has dissipated? Only time will tell how this will change the delivery system of the life insurance industry so the jury is still out as to how much the covid-19 pandemic will affect long term life insurance sales.