U.S. insurers are doing the once unthinkable, turning away business from some Americans who want a life-insurance policy.
Some life insurance agencies are limiting their services as the economic impact of the coronavirus pandemic prompts issues to the industry.
On Sunday, the Wall Street Journal reported a number of insurers are denying coverage to potential customers because of the interest rate collapse resulting from COVID-19. The agencies use interest rates to price their policies, profiting from a percentage of interest acquired between the date the policy is taken out and when it is claimed.
“It’s hard to do well enough, when the interest rates stay super low for a super long period of time because the premiums they collect from you have to go in relatively very safe, very interest rate sensitive assets,” explained Eric Dinallo of premier law firm Debevoise & Plimption LLP.
Since the economic fallout, several companies, including Penn Mututal Life Insurance and Nationwide Mutual Insurance, have put a halt on certain services.
Penn Mutual has temporarily discontinued life insurance policies for people over 70-years-old with underlying health conditions. This is a move life insurance executives believe is necessary as older Americans succumb to the coronavirus at higher rates than younger people.
Nationwide is reducing the size of guaranteed universal life insurance policies, guaranteeing annual premiums won’t increase during a customers lifetime. The decision also shifts the burden of covering any loss of interest income to the insurers.
Meanwhile, some industry executives have expressed optimism that the pandemic will shine a light on life insurance and garner a greater appreciation for it.