With the entire economy experiencing turbulence due to the COVID-19 pandemic, many are starting to wonder about the strength of insurance carriers.
I had an opportunity to get the perspective of John Ryan, Founder and CEO of Ryan Insurance Strategy Consultants, of Greenwood Village, Colorado, regarding the latest developments with life and long-term care lines his firm represents. Here is a summary of our interview last week:
Q: Given the COVID-19 pandemic, how do carriers view their ability to pay claims, given the increased rate of deaths?
A: The carriers are required to have a reserve for the death benefits they have on their books so there are few issues on existing in-force policies. Many carriers are adjusting what they are currently offering. Many have temporarily reduced their maximum age of issue, maximum coverage, or premium amounts, and have limited some of their riders. A few are postponing clients with chronic underlying conditions at higher risk to COVID-19.
Q: What else are carriers doing at this time? With many people losing jobs or on temporary layoff, some are having trouble paying premiums.
A: Carriers are doing everything possible to help those impacted by COVID-19. They are extending grace periods for premium due dates, although lapse notices are going out as scheduled. Carriers in some cases may extend payment due dates, or make other payment arrangements, at the request of policy holders.
Q: What about insurer financial strength? Will insurers go out of business?
A: It is too early to tell, but better rated carriers are likely to fare better. Life and Long-Term Care insurers have done a good job paying claims. Insurers maintain a strong financial position, so they have the resources to pay, and they are generally portraying that business continues as normal. Even with most employees working from home, they are ready to serve, and have deployed additional tools to support their customers.
Q: Any other thoughts?
A: People look to the stability of insurers during unsettled times. Insurers have seen pandemics before and are standing up to this one as one might expect: Underwriting standards are tightening. Consumers can expect additional medical review for new policies or increased coverage. We always recommend working closely with a personal financial adviser who has a good appreciation of goals, and who can ask the right questions to prepare for the insurance review with a licensed agent. Working with a knowledgeable, independent insurance agent who can offer multiple policy solutions is more important than ever.
Ryan Insurance Strategy Consultants has been helping fee-only financial advisers and their clients with life, disability, and long-term care insurance needs since 1978.