COVID-19: Why Some Life Insurers are Not selling Hybrid – products to age’s 70+ (Life & LTC)
Simply put, due to the current pandemic, a higher death rate is expected than what was predicted – especially for older ages as described in CDC guidelines. The problem for insurers is that this higher mortality rate was not priced into the product (so not collecting enough premiums). By temporarily restricting issue ages, they can minimize their risk until COVID-19 has been contained. Note, this is not unique to hybrid – linked benefit products. Some companies have also restricted issue ages for other life products such as WL, UL, and IUL. You may also see new premium limits, or restrictions on the maximum table rating allowed.
Could any Other Factors be Influencing Decision to Restrict issue ages?
Yes, some companies have reported the prolonged declining interest rates and volatile markets were the reason for hybrid issue age restrictions. In addition, some implemented rate increases on top of temporarily postponing issue ages to older ages 70+.
Have Insurers Abandoned the Very Clients who Need Insurance Most?
It may appear so at least temporarily; but the answer is No. The main obligation of insurance companies is to keep the promises they’ve already made. Naturally, they maintain statutory reserve requirements to meet their claims obligations. In today’s unprecedented environment, when a company takes action to increase their price, reduce interest rates, or restrict the sale to older ages, these actions are entirely predictable. It is a proactive, prudent move for companies to do what it takes to remain profitable, so they can keep commitments to existing policy holders and be there for future ones.
Ironic twist, the Negative Actions by Insurers are for the Greater Good
Until there is a vaccine for COVID-19, we are facing heart breaking times with an uncertain future. To date, the “cure” has been wearing masks and abiding by stay-at-home orders. I find it to be a painful twist of irony, that for some insurers to guard their future, they too are temporarily “social distancing” from older insureds – for the greater good. As an industry, our way through this is Not to focus on temporary negative actions. Instead, I propose we reflect on life insurance policies previously sold, and the death benefit checks insurance agents are undoubtedly delivering to beneficiaries due to COVID-19. We’ve all been humbled and come to recognize that doctors, nurses, truck drivers and grocery store workers – were America’s true heroes all along. Sadly, life insurance professionals are also about to be recognized as heroes too, by the surviving family members who receive the death proceeds.