The Consumer Federation of America says life insurers should voluntarily disclose the changes they are making in life insurance underwriting procedures and standards as a result of the COVID-19 pandemic. The Washington-based federation says life insurers ought to at least answer basic questions, such as whether they will require applicants to use COVID-19 vaccines, what kinds of tests and test results they’ll require and whether and how standards might vary by applicant age. If life insurers don’t begin posting underwriting guidelines voluntarily, then state insurance regulators should work through the National Association of Insurance Commissioners (NAIC) to standardize COVID-19 underwriting disclosures, according to the federation.
The federation made that argument in response to a letter from Susan Neely, president of the American Council of Life Insurers, who told the federation that life insurance remains widely available, that U.S. life insurers are paying out an average of $215 million in life insurance benefits every day, and that many of the long-term implications of COVID-19 still are unknown.
“As experience evolves and more information becomes available,” underwriting will evolve as well, Neely wrote to the federation.
“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,” Neely wrote. “Insurers are legally required to make underwriting decisions based on sound actuarial principles to protect all policyholders… Arbitrary decisions are prohibited.”
The Federation’s Take
Federation officials have emphasized in their response that Neely acknowledged that some underwriting decisions might be delayed.
“This admission is stark evidence that we need disclosure from life insurers to let us know who the ‘some people’ are who face delay and what ‘circumstances’ lead to such delay?” J. Robert Hunter, the federation’s director of insurance, said in a comment about Neely’s letter.
Although a delay is not a rejection, the reason for any delay would be to seek COVID-19-related medical information that might lead to a rejection, according to the federation. The federation said it’s continuing to press for the NAIC to consider adopting a model rule for life underwriters requiring transparency and reasonable standards regarding delay or denial of life insurance coverage because an applicant has or previously had COVID-19.But, if life insurers began disclosing their standards voluntarily, they might vary. Setting varying standards might not be possible if regulators set the standards, Hunter said.
The Connecticut Department of Insurance began addressing the issue of use of information about COVID-19 in life insurance underwriting back in April 2020.Andrew Mais, Connecticut’s insurance commissioner, warned life insurers in Connecticut in April against asking questions related to COVID-19 on life insurance applications.Application forms should not include questions about quarantines or any other questions related to COVID-19, Mais said. “Any life insurance application application’s form filings that contain such questions will not be approved,” Mais said.