Document Type
Thesis
First Faculty Advisor
Gao Niu
Second Faculty Advisor
Rick Gorvett
Keywords
life insurance; COVID-19; mortality; impairment factor
Publisher
Bryant University
Rights Management
CC - BY - NC - ND
Abstract
The COVID-19 pandemic has had substantial and widespread impacts around the world that are not yet completely understood but will likely be experienced for years to come. This research seeks to analyzed and quantify the pandemic’s effects on the life insurance industry in the United States through the use of mortality models. Because the life insurance industry relies on the ability to accurately predict an individual’s mortality, it is necessary to investigate the impacts of the pandemic on mortality predictions and accuracy. Impairment factors were developed using pandemic mortality data and applied to existing mortality tables to compare expected and actual mortality throughout the pandemic. It was found that mortality was higher than expected for 2020, 2021, and 2022, leading to subsequent declines in life expectancy. This increase in mortality and decline in life expectancy depicts the inaccuracy of prior models for the pandemic. Additionally, higher mortality rates means that insurance companies likely were not charging enough in premiums to offset the mortality risk they were facing, likely resulting in substantial financial losses for the life insurance industry throughout the pandemic. Through the creation of more accurate mortality models for the pandemic, subsequent insurance products can be more accurately priced and reserved. Future insurance products should be designed to consider clients with heightened risk of mortality due to COVID-19 and potential widespread increases in mortality overall.
