COVID-19 Underwriting Update

I wanted to keep you updated as we continue to monitor the industry's reaction this this rapidly-evolving pandemic.

I want to continue to reassure everyone that death claims will be paid for this illness. The only issue would be if a claim made during the contestability period (2 years in most states) is contestable due to material misrepresentations made in the application and underwriting process, which is a consistent position for any cause of death and is unchanged from where the industry has been for decades.

Life insurance companies are still not testing for COVID-19 in underwriting, and I don't expect that to change in the immediate future. 

We have seen guidelines continue to change with respect to foreign travel some examples of which are:

  • John Hancock will require a statement on their application under Special Instructions to the affect that neither the insured, nor members of his or her household, have traveled abroad or by cruise ship in the last 30 days. If this statement is not added to the application on submission, it will be added for signature as an amendment. If this statement cannot be attested to, then underwriting may be deferred for a period of time.

  • PacLife will defer issuing a policy on insureds who have traveled to a travel-restricted country (which appears to be all countries as of 3/19) for 14 days and will then ask whether the insured has tested negative for COVID-19, if the insured has not tested negative then medical records showing recovery from the virus will be required to issue.

  • Banner will postpone for any planned foreign travel and will postpone recent foreign travel until insureds have been back in the U.S. for 30 days.

We are also starting to see carriers take steps to document infection or exposure to COVID-19 during underwriting so examples of which are:

  • John Hancock will require a statement on their application under Special Instructions to the affect that neither the insured, nor members of his or her household, has come into close contact with anyone known to the insured to have tested positive for COVID-19 in the last 30 days. If this statement is not added to the application on submission, it will be added for signature as an amendment. If this statement cannot be attested to, then underwriting may be deferred for a period of time.

  • Banner will require a health statement on all policies as a delivery requirement.

These are just a few examples of recent official changes. In general, you can expect that very recent or planned foreign travel will cause problems in underwriting. I also expect more carriers to move toward what John Hancock has announced to try to get insureds on the record that they are not aware of exposure to COVID-19 though an amendment or health statement on delivery. People with known exposure or infection will be postponed for negative screening or documented recovery respectively.

Underwriting for insureds at higher risk of serious illness or death related to COVID-19 such as older insureds or insureds with pulmonary impairments is likely to be less-aggressive. For example if someone at risk is borderline between a more-expensive class or a less-expensive class they are more-likely to receive the more-expense class, underwriting requirements are less likely to be waived, and health statements on delivery will be more-closely examined.

All of insurance companies want to find ways to continue to write business, but they also want to avoid adverse selection or "buying" a COVID-19 related early death claim. I expect additional announcements that try to balance being cooperative with being accommodating in the coming weeks and I will keep you updated as the situation evolves.

 

Byron Rasmussen, FALU, FLMI

Allegis Chief Underwriter