How Life Insurance Shopping Has Changed During The Pandemic
Article by Amy Danise Forbes Editor
The pandemic got a lot of people thinking about how to increase the financial security of their families, now and in the future. And life insurance moved to the top of many to-do lists.
A survey conducted in May and June 2020 by Life Happens, an industry-funded education group, found that 67% of Americans say that the pandemic has been a wake-up call for them to examine their finances. And 30% say that life insurance has been one of the top topics for dinner table discussion.
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“It’s unfortunate it takes an event like this to remind us that we’re all mortal and just one unforeseen event away from needing that policy. Things happen—accidents happen, pandemics happen—and it’s important we are protected,” says Brooks Tingle, president and CEO of John Hancock Insurance.
Whether you’ve been putting off buying life insurance for years or it has suddenly hit your radar, there’s never a bad time to make a financial plan and lock in coverage. Life insurance companies and agencies quickly implemented plans to work around the hurdles of the pandemic, while at the same time handling an increase in applications.
“COVID-19 has highlighted how important planning for the unexpected really is,” says Aaron Ball, senior vice president and head of insurance solutions at New York Life. “Although more people might be more focused on buying life insurance as a result of this situation, we expect that the importance of building in a cushion—whether that is an emergency fund, adequate insurance or other mechanisms for protection within a financial plan—will resonate with consumers well beyond what is a hopefully a relatively short period of uncertainty.”
Life Insurance Buying During the Pandemic
If you’re wondering if the pandemic is a good time to be buying life insurance, it is. In fact, because some companies have started raising prices, now is the time to snag a good rate before prices are higher across the board.
It’s also a prime time to make an application that won’t require a medical exam. In the past, buying a no-exam policy usually meant paying more because the insurer had less information on you to assess their “risk” in selling you a policy.
“The labs, doctors’ visits, documentation and in-person meetings made the whole experience lengthy and cumbersome,’ says Tingle of John Hancock. “The pandemic made all those steps impractical, if not impossible.”
Even before the COVID-19 pandemic, many insurers such as John Hancock had been working on ways to use data (such as electronic health records and prescription databases) as a substitute for medical exams and to digitalize the life insurance buying experience.
Byron Udell, CEO of AccuQuote, a national online life insurance agency, observes that many life insurers quickly adapted by offering no-exam policies at prices comparable to policies that required an exam. This is giving life insurance buyers more choices for coverage—without worrying about how to get an in-person exam done. AccuQuote has seen a 20% to 30% uptick in life insurance applications.
You may still run into a medical exam requirement if you’re looking for a large amount of coverage (in the millions) or you’re older or have health issues.
You might not even know if you’ll be required to do a medical exam until after you submit an application. This “is what we call a ‘maybe no-exam’ process, as we never know, up front, whether the exam will be waived,” says Udell. He says he’s been surprised at some of the high policy amounts approved—and at the best rates—with the exam waived.
Some life insurance buyers will purchase the maximum coverage they can get without an exam, even if they need more, says Ryan Pinney of Pinney Insurance, a distributor of insurance and financial products that specializes in digital sales, service, and support.
“Before the pandemic, our average applicant’s age was over 44, and now it’s closer to 40,” says Pinney. “These consumers believe they don’t need much coverage because they’re young and not in their peak earning years yet. They’re taking action now because, in many cases, they can get up to $1 million in coverage without an exam. That limit becomes an artificial cap on what they’ll apply for.”
Whether life insurers will continue to offer plentiful options for no-exam policies after the pandemic remains to be seen. Udell predicts medical exams could make a comeback if insurers see higher mortality (meaning claims) than they expected on policies that didn’t require a medical exam.
“I suspect some companies will re-introduce exams, at least optionally, even at lower face amounts, in exchange for the possibility of an even lower rate,” says Udell.
Pinney also predicts that insurers will start wanting more applicants to take medical exams after the pandemic. “The mortality risk is too high to keep offering these policies at the current prices,” says Pinney. “This means one of two things will happen: Either insurance pricing will go up 5% to 10% over the course of the next year, or carriers will reinstate requirements for medical exams.”
Tingle of John Hancock Insurance thinks innovations that allow a shift away from medical exams will get traction. “There is no question that COVID has accelerated a move toward a less invasive, less burdensome and more timely purchase process. As an industry we can’t turn back. Will there be a period when those traditional requirements resume? For sure. But as far as the overall trends toward faster, easier ways to buy life insurance, those have to continue at an accelerated pace,” he says.
The unexpected closing of one of the three primary providers of life insurance medical exams also caused some upheaval, notes Udell. In early July, EMSI suddenly shut down and insurers had to scramble to get their applicants rescheduled with other exam providers. (The other two large providers are ExamOne and APPS-Portamedic.)
Pandemic Spurs Life Insurers to Ask Different Questions
A typical life insurance application includes dozens of questions about your health, prescriptions, family health history, driving record and dangerous activities such as sky-diving. Since the application process is all about the insurer “assessing risk,” COVID-19 questions quickly became a standard part of applications.
Have you been diagnosed with COVID? Has someone in your household been diagnosed with COVID? “Yes” answers could lead to a postponement of your application.
New concerns are emerging around applicants who have had COVID-19. There’s uncertainty about how the virus affects a person’s long-term health and life expectancy. Udell knows of at least one insurer that will no longer offer the best rates (the “preferred” rate class) to applicants who had COVID-19, even if they appear to have fully recovered.
“Whether this action is rational or justified, no one yet knows,” says Udell.
International Travel Is Still a Concern
When the pandemic started, traveling internationally was seen as one of the riskiest things you could do from a life insurance buying perspective. Most life insurance companies instituted postponements for applications until after the travel. Once you were back and healthy, and after a certain period of time such as 30 days, the insurer would consider your application.
Now, of course, traveling even to Florida seems ill-advised, but domestic travel is not an application question. Postponements for international travel remain common.
If you have plans for international travel this year, expect a delay on a new life insurance policy for at least 30 days. And that’s assuming you don’t have additional international travel plans.
Tips for Buying Life Insurance Now
If you’re ready to buy coverage, life insurance companies are fully open for business. Here are some important considerations.
Be prepared for potential delays due to the pandemic: You may experience a delay in the application process if your insurer wants to request medical records, as many doctors’ offices have reduced staff for doing such tasks. If your application will require a medical exam, you might also experience a delay, especially if you’re avoiding in-person contact with strangers.
Now is the time to get in on good life insurance prices: Many life insurance products are priced at all-time lows, but the winds are shifting. Udell at AccuQuote has already seen dozens of companies raising prices because of the low interest rates. Continued low interest rates will put further pressure on insurers to raise rates in order to compensate for lower investment gains.
“I would characterize today’s environment as a “fire sale” of sorts,” says Udell. “I don’t believe we’ll see prices as low as the prices that are still available for much longer. A year from now, I am very confident that prices will be higher, across the board. Those that buy coverage now will be happy they did.”
Take time to look at how much life insurance you need as part of your bigger financial plan: It’s best to look at life insurance as one of several players in your family financial strategy. Seeing it as part of the bigger plan can affect how much you decide to buy, and what type of life insurance to choose.
“While applying for life insurance has become easier than ever, figuring out how much insurance you need and the role that insurance plays as part of your overall financial strategy can be much more challenging,” says Ball of New York Life. “Navigating this with the help of a trusted financial professional can ensure your family’s needs will be covered.”
Tingle of John Hancock says, “My advice is: Have life insurance because things happen. We take the matter of paying claims very personally and having the opportunity to see so many stories and the people behind the claims, you are reminded of all that can happen in life. People get ill unexpectedly. They have accidents. We’ve had situations where husbands and wives have died within days of one another. Many people we’ve seen pass away of COVID-19 did not have life insurance. So, my bottom line message is, please, have life insurance.”
