COVID-19 linked to increased payouts

A record $100 billion was paid out in life insurance benefits in the United States last year, and COVID-19 deaths most likely caused the increase in death benefits payments, an industry trade group said on Monday.

Payouts jumped 11 percent last year to $100.19 billion, the American Council of Life Insurers, or ACLI, said. The increase was on the heels of a 15 percent year-over-year rise in 2020, when death benefit payments totaled $90.43 billion.

The increases are among the largest year-over-year increase since the 1918 influenza pandemic, when payments had surged up to 41 percent.

“For the second year in a row, life insurance benefit payments increased by double-digit percentages,” said Andrew Melnyk, vice-president and chief economist of the ACLI, in a statement on Monday, as quoted by The Wall Street Journal. The increase in average life insurance benefit payments from 2011 to 2021 is 4.9 percent, the ACLI said.

The purchase of life insurance coverage last year also rose, with nearly 46 million life insurance policies purchased last year, a 6.1 percent increase over 2020.

With the threat of COVID-19 still on consumers’ minds, people continued to seek life insurance coverage, Melnyk said. Total life insurance coverage reached a record $21.2 trillion last year.

ACLI data also showed that last year’s annuity payments, which most typically go to retirees, hit a record high for a single year, with insurers paying out $97.7 billion to annuity holders.

Melnyk said ACLI data does not break down the causes of death of life insurance policyholders, but it is reasonable to attribute the bulk of the increase to the COVID-19 pandemic.

COVID-19-related deaths in the US rose by 20 percent last year to approximately 460,000, the Centers for Disease Control and Prevention said.

That means the coronavirus is likely to rank third as a cause of death in the US this year.

On average, more than 300 people are still dying each day from COVID-19, most of them aged 65 or older, the CDC said. While that is much lower than the 2,000 daily deaths at the peak of the Delta wave, it is still about two to three times the rate at which people die from the flu.