The Covid-19 pandemic was barely underway in the U.S. when life insurance companies started wrestling with whether to sell new policies to people who survived the virus.
The Delaware Department of Insurance started seeing it in June. Companies filed requests to change their application forms to specifically ask applicants if they’d had Covid-19. The Interstate Insurance Product Regulation Commission—which uses a uniform set of standards to regulate insurance products for 44 states, the District of Columbia, and Puerto Rico—has approved 32 such requests since March. It’s also known as the Insurance Compact.
Millions of people who survived Covid-19 are expected to be dealing with medical issues including heart, kidney, and lung damage long after the pandemic subsides. But the long-term effects on mortality are unknown, even for those who had mild or asymptomatic cases. That’s left life insurance companies without the risk data they typically rely on in deciding who to cover, meaning survivors could have a harder time getting coverage or have to pay more for skimpier plans.
Insurance companies are afraid, said Bob Hunter, director of insurance at the Consumer Federation of America and a former Texas insurance commissioner. “This is classic insurance reaction. They did it after AIDS and SARS,” he said.
Individual and group life insurers can’t add riders to their policies to refuse to pay out benefits if someone dies of a specified illness like Covid-19, under the Insurance Compact’s standards.
But Hunter said he’s not aware of any state regulations that stop insurance companies from underwriting against a disease like Covid-19. Some survivors have already been denied a policy because they tested positive.
Due to Diagnosis
It happened to Lisa Moyles, 57, of Stratford, Conn.
“Our decision was due to your medical history, including your recent diagnosis of COVID-19,” Symetra Life Insurance Co. told the intellectual property attorney in an April 14 letter denying her a term life policy. That was two weeks after she had tested positive for the novel coronavirus. Symetra Life Insurance Co. is a subsidiary of Symetra Financial Corp., which was acquired in 2016 by Sumitomo Life Insurance Co., a leading life insurer in Japan.
Moyles and her wife, Lise Beaudry, started showing symptoms of Covid-19 at the end of March, shortly after coming home from a trip to Aruba. The couple got tested and received positive results within hours of each other on April 1.
“I can say it’s the sickest I’ve ever been,” said Moyles, who recovered without having to be hospitalized. Aside from some lingering nerve pain on the bottom of her feet, she said she’s fully recovered.
Symetra also denied Beaudry, 66, a policy. The denial letter she received Sept. 21 didn’t specifically cite her Covid-19 diagnosis as a reason. The company said its decision was based on Beaudry’s “medical history,” which included records the company obtained from her doctor. Beaudry also recovered from Covid-19 without having to go to the hospital and says she doesn’t have any other pre-existing conditions.
“I would think they would insure us over people who didn’t have it,” Moyles said. “We’ve both tested twice for the antibodies,” meaning the couple has demonstrated some immunity to further infection.
Not ‘Disqualifying Event’
In an email, a Symetra spokesperson said “policies are approved, denied or postponed based on multiple factors, including medical history,” and the company can’t comment on a specific application.
But “a past COVID diagnosis is not in and of itself a disqualifying event, nor do Symetra applications feature any COVID-specific questions,” the spokesperson said. “Our goal is to deliver life insurance coverage to our customers to the best of our ability when they need it, in both challenging and good times.”
An application form for individual life insurance, which Symetra sent to the Insurance Compact for approval on Oct. 8, however, asks applicants, “Have you been diagnosed or treated by a medical professional for COVID-19 (SARS-CoV-2)?”
The Symetra spokesperson said that application form is for a new term product the company is developing but isn’t planning to launch until 2021.
Some companies have created a separate Covid-19 questionnaire in addition to their regular applications for new customers.
Banner Life Insurance, a Frederick, Maryland-based unit of Legal & General America, is asking applicants if they’ve been diagnosed by, sought treatment from, been given medical advice by, or examined by a member of the medical profession for a fever, cough, shortness of breath, fatigue/tiredness, a runny/watery discharge from the nose, or a sore throat in the last 30 days, according to a form filed with the Insurance Compact. Legal & General America is owned by
The company also wants to know if applicants have been hospitalized, for how long, and if they’ve fully recovered. In a statement, Legal & General America said it doesn’t preclude applicants from obtaining a life insurance policy if they have tested positive for Covid-19.
“For the majority of applicants, a history of COVID-19 has no impact on their ability to obtain a life insurance policy,” the company said. “In the case of extreme illness from COVID-19 requiring hospitalization or ventilation, applicants are assessed on a case-by-case basis—as with all illnesses—because the underwriting process can vary by state and includes a comprehensive review of the applicants’ health history.”
Applying for life insurance is an involved process. Applicants have to provide their medical history and may be required to undergo a medical exam. But insurers don’t have to specifically ask about Covid-19 to find out if an applicant has tested positive.
“There are already questions baked into the application that ask, ‘Have you been in the hospital in the last five years?’ ‘Have you seen a doctor?’” said Karen Schutter, the Insurance Compact’s executive director. “There are already general questions that would elicit Covid information.”
The Insurance Compact put out guidance at the start of the pandemic telling insurers not to ask if an applicant has Covid-19 symptoms. Insurers, however, can ask if an applicant has been diagnosed with Covid-19, or if they’ve been treated, tested positive for, or been given medical advice for the virus.
“They had to have a diagnosis according to those uniform standards that are adopted by our member states,” Schutter said.
The Connecticut Insurance Department explicitly warned insurers in an April notice against filing application forms for review that include medical or other questions related to Covid-19. The department said it has received eight complaints specifically related to Covid-19 claims, but found only one issue: John Hancock Life Insurance Co. was improperly asking Covid-19 questions in sales materials.
John Hancock said the Connecticut complaint was related to instructions for completing applications that were intended to help assess Covid-19 risk.
“The complaint was resolved promptly when we discontinued those instructions after hearing from the Connecticut Department,” the company said in a statement.
Moyles and Beaudry started applying for term life insurance through Symetra before the pandemic hit and weren’t asked about Covid-19. Both wanted to upgrade their life insurance to broader policies that include a payout of $250,000 in case of death and coverage for long-term care, should it be needed.
“They had our applications for months and as soon as we get our results, we’re denied,” Moyles said.
Each life insurer has a duty to consumers under state law to treat people with similar health characteristics with an even hand and regularly assesses health and mortality developments, Jack Dolan, a spokesman for the American Council of Life Insurers, said in an email.
“While COVID-19 will inform underwriting, life insurance is a dynamic business, and companies want to write new policies,” he said. “This pandemic won’t stop them from offering in the future even more than the nearly $20 trillion in financial protection they’re providing today for families and businesses large and small across the country.”
Afraid as they may be of writing policies for people who may die prematurely, insurers also take a financial risk in denying Covid-19 survivors coverage in the absence of data.
“If you guess that people have a higher mortality and they don’t, that means you are denying people access to coverage and passing up business that could be profitable,” said Daniel Schwarcz, a professor at the University of Minnesota Law School, whose research focuses on insurance law and regulation.
On the flip side, insurers could end up paying a higher rate of claims 20 to 30 years down the road, he said.
Consumer advocates like Ruth Susswein, deputy director of national priorities at Consumer Action, recommend people shop around for multiple quotes before applying for a policy. Consumers should check not only the cost but the amount of coverage being offered, she said.
If you can demonstrate you had the disease, recovered fully, and are otherwise in good health, you probably have a wide open marketplace, said Steven Weisbart, chief economist at the Insurance Information Institute, a nonprofit trade association for the insurance industry.
The one thing consumers can’t do, advocates said, is lie on an application. Insurers can refuse to pay out death benefits if they find out a policy holder knew they had a disease and failed to disclose it, Hunter said.
“That could leave your loved one without the money you would have hoped,” he said.
Moyles and Beaudry know life insurance is something they should have, but their financial adviser has recommended tabling efforts to gain a new policy for now.
“I think we’re discouraged enough to just be done with it,” Moyles said. “We’ll have what insurance we have and that’ll be the end of it.”