Record Group Insurance Death Claims in 2021

Rate Increases Likely to Follow

Last year, group life insurance companies experienced a record number of death claims. Two recent reports include:

• MetLife’s adjusted quarterly earnings in the U.S. group-benefits unit plummeted 95% to $20 million, from $383 million the year-earlier with increased deaths of younger people (i.e., those under age 65) with employer-sponsored benefits.  MetLife paid out $1.06 for each $1 of group-life-insurance premium collected.
• OneAmerica, one of the largest providers of group life insurance in the U.S., announced a 40% increase in the annual death rate as 2021 produced the most deaths in the history of the life insurance industry.

Shockingly, the surge in death claims cannot be directly attributed to the COVID-19 virus. Though nearly 1,000,000 people died of COVID in the United States in 2021, the majority of the increased death rate is attributable to tertiary factors brought on by the pandemic response. A combination of fewer routine checkups as well as understaffed hospitals led to many more preventable deaths.

Continued high death claims have insurance companies adjusting– what will follow are cost increases and more restrictions on coverage. Benefits and finance teams will need to be creative to provide competitive coverage for a reasonable cost, particularly at a time when employees find life insurance a necessary benefit.

A Solution

Particularly at executive levels, group insurance can be expensive for the company and executives. Rather than paying for group coverage on executives, companies purchase individual life insurance coverage with enhanced benefits and potentially lower executive tax costs.

• Individual life insurance has not experienced the dramatic rate increases seen in group insurance.
• Individual life insurance is an asset of the company; cash value remains on the company’s balance sheet offsetting the premium expense.
• Individual life insurance may provide favorable imputed income rates, lowering the executive’s income tax cost.

If you would like to discuss how individual life insurance can be utilized in place of group insurance, please call your Mullin Barens Sanford Consultant. Schedule a call via this link to learn more.

Through a powerful combination of independence and experience, Mullin Barens Sanford Financial and Insurance Services (MBS Financial) is a leading consulting firm that assists companies with 409A and other executive benefit needs.