U.S. life insurers are paying out far fewer Covid-19 death claims than initially expected, largely because the virus is disproportionately killing people with little to no insurance.
In the past few weeks, many life-insurance companies have sharply reduced estimates of their exposure, as measured by payouts per 100,000 U.S. Covid-19 fatalities. Estimates have come down by an average of 40% to 50%, according to Credit Suisse stock analyst Andrew Kligerman.
Driving the rapid reduction in exposure are two groups: older Americans and minorities.
Older people often have smaller policies than people who are still in the workforce. The latter typically buy policies to protect spouses and children against the loss of a breadwinner’s income, aiming to cover home mortgages and fund college tuition. Based on data through mid-September, the federal Centers for Disease Control and Prevention calculates that approximately four-fifths of U.S. deaths involving Covid-19 have been of people at least 65 years old. Its current total shows just over 200,000 total U.S. deaths.
There has also been a disproportionate impact on minorities, such as African-Americans. More than a fifth of Covid-19 deaths have been non-Hispanic Black people, above their roughly 13% representation in the overall population, according to government data.