12/06/2023

Monthly term assurance claims during COVID-19 pandemic

Chris Reynolds, Chair of the CMI Assurances Committee, discusses results of analysis of term assurance claims by month, published in Working Paper 176. The work builds on previous analysis of experience by month in 2019 and 2020, by adding new 2021 data.

The CMI Assurances Committee has analysed how the COVID-19 pandemic affected mortality and accelerated critical illness term assurances claims during 2020 and 2021, compared with 2019, in Working Paper 176. This updates previous analysis in Working Paper 162, for 2020 claims were compared against 2019.

This blog presents some of the results of this analysis, focusing on trends in the number of incurred claims only. The working paper itself includes results of an experience analysis, comparing incurred claims with expected claims calculated using the “16” Series term assurance tables. Further detail on the dataset and methodology is provided in the working paper but we note two of the main data considerations below:

1. There is often a delay between a term assurance claim occurring (i.e. through a death or illness diagnosis) and it being settled. To present our best estimate view of claims without having to wait to ensure all claims in the period have been settled, we include allowances for these claims, commonly known as incurred-but-not-settled claims. These allowances are considerably larger for the latter months of 2021, particularly for accelerated critical illness claims, for which the delays are typically longer. Consequently the results for late 2021 are subject to greater uncertainty than those earlier in the period. Further detail and a sensitivity to these allowances is included in Working Paper 175.
2. One data provider drops out of both the mortality and critical illness datasets at the end of 2020, and we add another a new data provider to the mortality dataset in 2021; both providers are relatively small in size and do not materially affect the features described.

Mortality

We show incurred claims by month for term mortality in 2019 to 2021 in Chart A. Claims are split by gender and smoker status, in line with our typical term assurance analyses.

There are several features common to both male subsets, and the female non-smoker subset:

• A spike in claims in April 2020 which coincides with the first wave of deaths in the general population from the COVID-19 pandemic. This is most pronounced for male non-smokers, and similar for female non-smokers and male smokers (in percentage terms, compared with 2019 average claims), albeit the “spike” feature is less pronounced for male smokers due to relatively high claims in preceding months.
• A “ramping up” of claims from August 2020 to a peak in January 2021, this time coinciding with the second wave deaths in the general population from the pandemic, where a new variant become dominant. Again, the peak is most pronounced for male non-smokers. The drops in claims after January 2021 is steeper for female non-smokers than it is for male non-smokers, for whom it is more drawn-out.
• An apparent increasing trend in claims to the end of 2021, but we caution that allowances made for claim delays are considerably higher in these months, peaking at 42% of claims in December 2021. This makes the results for these months subject to greater uncertainty.
• There is no discernible spike coinciding with the third wave of infections (Delta variant) that began in July 2021.

These characteristics in the shape of mortality by month appear broadly consistent with the features seen in the general population for this period.

These trends are less apparent for female smokers, the smallest subset of the dataset, due to the scale of the y axis. Interestingly, there is a peak in claims in December 2020, which is seen one month later in all other subsets.

Chart A: Number of claims by month in the term mortality dataset

Accelerated critical illness

Chart B shows the corresponding picture for accelerated critical illness, which includes both mortality and critical illness claims.

The trends in male and female non-smoker claims are easy to compare as the number of claims are very similar (average monthly claims in 2019 is 298 for males and 300 for females). Both male and female non-smoker claims generally trend downwards over the first half of 2020, a period coinciding with the first wave of the COVID-19 pandemic, with females experiencing a bigger decrease.

The differences in the size of the decrease may be explained by the higher proportion of deaths for males and a higher proportion of cancer claims for females. Our analysis of experience by cause of claim in Working Paper 167 showed the effect of the COVID-19 pandemic on each of these causes in 2020 and we hope to be able to update this analysis in the future.

The rebound in claims during late 2020 and 2021 appears very similar for male and female non-smokers. Again, the results in late 2021 are subject to considerable uncertainty.

Trends are less apparent for male and female smokers in this chart as volumes are low and experience relatively erratic.

Chart B: Number of claims by month in the term accelerated critical illness dataset