
Steven Graham, Technical Policy Manager in the IFoA’s Policy Team, gives a taster of what to expect in the IFoA’s new Inclusive Insurance Bulletin, Responding to change.
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A group of Life actuaries, working as part of the IFoA Covid-19 Action Taskforce, are releasing a series of blogs considering various ways that the pandemic has affected Life insurers.
The third blog in this series explores the pandemic’s impact on future new business sales and considerations in underwriting, pricing and life insurance product demand.
The Covid-19 pandemic has resulted in significant worldwide business interruption and operational changes. As the virus directly affects risks associated with the life and health of the population, insurers are currently considering whether any changes to the assumptions used for valuation of these risks will be required at this year end.
There is significant uncertainty with regard to the impact of Covid-19 on future mortality and morbidity rates. A clearer increase in mortality of older people and those with existing health issues has been observed worldwide. Some studies1 from Wuhan have indicated that there is evidence of long-term ailments, such as liver damage, lung damage, etc., in people who have been infected by Covid-19. There may be a need to revise mortality and morbidity assumptions used by insurers for pricing of future business. Key consideration needs to be given to the underlying uncertainty of the impact of Covid-19 and whether any margins in pricing assumptions will be required in this respect. Availability of a vaccine in the near future may change this outlook.
A large variety of products are offered by life insurers. Covid-19 may potentially affect all products, but the level of the impact may vary by product category.
All insurers are giving greater consideration to the assumption setting process and monitoring closely emerging data, which is expected to start showing the impacts of the pandemic. Over time changes in consumer behaviours, interest-rate changes, mortality and morbidity will emerge, and clearer trends will be identified. For now, underwriting remains the key tool for insurers’ risk management in the short term. Ensuring that all practical scenarios of Covid-19 impact are considered within stress and sensitivity testing should help with a more informed risk assessment when considering future new business.