COVID-19 is causing more life insurance rejections

Prudential Financial is one of several insurance companies that have imposed new restrictions on people who recovered from COVID-19 and want to apply for life insurance. They will have to wait a minimum of 30 days, depending on a severity of the illness.

“Like other businesses, Prudential has been actively monitoring the rapidly changing environment due to the impact of the COVID-19 pandemic,” the company said in a statement.

Life insurance made a comeback in popularity during the COVID-19 crisis, but some individuals are apparentlyhaving more trouble getting policies.

“Insurance companies are starting to delay writing life insurance policies, and sometimes after the delay, they just say no,” said Robert Hunter, director of insurance at the Consumer Federation of America in Washington, D.C.

The organization wants more transparency from the insurance industry on what standards insurance companies use when they decide to delay or reject someone’s life insurance application for reasons related to COVID-19. That way the underwriting process is more likely to be consistent.

It would also force insurance companies to specifically answer important questions about delays and rejection for life insurance policies. Is it based on the person’s age, a positive COVID-19 test, how long it’s been since a person recovered from COVID-19 or whether that person has been vaccinated?

The coronavirus has dumbfounded the mortuary tables that most insurance companies use to determine their policies. Possible longterm side effects from the virus could cause insurers to update their underwriting standards, and the threat of a recurring COVID-19 season might mean higher costs for the industry.

The American Council of Life Insurers, the largest trade organization of life insurance companies in the U.S., told the Consumer Federation of America in February that COVID19 hasn’t changed each life insurer’s duty under state law to treat people with similar health characteristics fair and equitably.

The organization said the industry has been forced to change as it adjusts to the virus threat.

“Many of the long-term implications of COVID-19 are unknown,” said a letter from the American Council of Life Insurers. “As experience evolves and more information becomes available, underwriting

will evolve as well.”

COVID-19 deaths across the country reached more than 515,270 as of the afternoon of March 3, according to the Centers for Disease Control and Prevention.

The American Council of Life Insurers in its February letter confirmed life insurance applications are taking longer to process.

“While today’s circumstances may delay a coverage decision for some people in some situations, a delay in the application process is not a rejection,” the ACLI said.

But Mr. Hunter pointed out that the reason for any delay would be to seek COVID-19-related medical information that might lead to a rejection. Therefore, it would be logical to assume that some rejections do occur after the delay period.

“If you have delays, you’ll also have turnaways,” said Mr. Hunter, a former Texas insurance commissioner.

He said delays and rejections are not uncommon for life insurance policies. It can happen for other health conditions such as cancer. The difference is consumers know what the conditions for approval are for other health conditions because it’s written in black and white on the application.

“But this is hidden behind the scenes,” Mr. Hunter said. “It’s not on the application. That’s why we want transparency, for the reasons they would turn someone away.

“We want this so that people won’t waste their time applying for coverage at an insurance company that won’t accept them,” he said. “I also believe if the standards are made public, insurance companies will be more reasonable in their requirements.”

The topic rose to the forefront following public comments made in the European press last month by executives at Prudential Financial and Aviva PLC, which suggested that the companies had imposed waiting periods of 30 days or more before insuring former COVID-19 patients, including those who have recovered.

Mr. Hunter said other insurers are limiting coverage by age groupings. Some are even imposing waiting periods on people who have not been diagnosed with COVID19, based on previous symptoms alone.

Adopting a model rule for life underwriters is good for everyone, not just new policy holders, he said.

Some people may have a life insurance policy and be considering dropping it for a time to save money if their financial circumstances have changed.

They need to know the possible dangers of losing the policy.

Four big states typically lead the action on adopting nationwide standards for the insurance industry — California, New York, Florida and Texas.

“If we can get those to move, the other states will follow,” Mr. Hunter said.