Many of you know that I’ve maintained my connections with attorneys, who when I touch bases with them, share information from their experiences as I do as well. In most instances I share that information with my readers and clients.
Recently, I’ve been hearing from my legal contacts that nearly all insurers have increased their risk management activities in order to recover from “life insurance” losses caused by COVID. While I would have assumed “disability liability” accounted for the majority of financial reserve losses, life insurance apparently accounts for the majority of hardships insurers are now attempting to recover from.
Life insurance is a very different insurance market, which is not based on restrictions and limitations, but rather premium is based on individual perils and hazards, and lifestyle factors that underwriters use to determine “the risk” of when each person will die. Everyone’s policy will be different based on age, sex, living profile, and any current medical conditions. Premium is set and each individual is placed in a group of expected mortality, statistically.
Therefore, it’s understandable that when large numbers of individuals die outside of their defined mortality risk groups, insurance companies may suffer financial losses. I had no idea Unum Group had such a stake in Life Insurance, which was usually sold as part of employer group STD/LTD products. It’s possible, though, that the company lost big-time in the pandemic.
The word is that Unum is not overturning denials on appeal, and is playing a real hard-butt, aggressive strategy in managing disability claims. It’s also possible other insurers are engaged in the same “catch-up” although I haven’t noticed any unfair or unusual activity in my client group. Using disability claim denials to cover losses in life insurance products is another first, although it’s possible.
Please also keep in mind that there is no “risk management” to Life insurance – a person is either alive or dead, and there is only one payable definition, namely the person dies. Compared to Accident Insurance, Life is an expected payout whereas Accident insurance is risk managed often not paying due to the “which came first the chicken or the egg” defense.
For example, an insured runs through an intersection to avoid a speeding car and slams into a tree. During the autopsy it is discovered the driver had cardiac disease and likely had a heart attack. The insurer refused to pay because it alleged the driver had a “sickness” prior to, and that sickness caused him to have an accident. Therefore, did the driver have a heart attack that caused the accident, or did the heart occur as a result of the accident to avoid other cars.? For these reasons I rarely recommend wasting premium dollars on Accident insurance.
Nevertheless, please be aware that insurance companies are now attempting to recoup losses caused by death and disability due to COVID. This means the management of your claim may be somewhat more difficult in the coming months heading toward 2nd Qtr.
