The Council said the, “The MoRTH letter on August 24, 2020 advising state governments over the validity of vehicle papers only extends to fitness certificates, permits, driving licences, and registration certificates.
Irdai has said insurers cannot reject motor claims on the grounds that the vehicle does not have a valid PUC (pollution under control) certificate. A statement has been issued by the insurance regulator to this effect on Wednesday.
The emission levels are fixed for motor vehicles in India. Once the vehicle undergoes the PUC test successfully, a certificate is provided to the vehicle owner. It helps you to know that your vehicle’s emissions are in alignment with standard pollution norms.
Under the regulatory sandbox guidelines, many insurers have come up with new motor insurance policies based on the concept of how much you actually drive your car. These types of motor insurance policies can help you save on premiums significantly.
Will life insurers be able
to pay all the death claims attributable
to COVID-19 that come on top of claims for deaths not directly related to the
pandemic?
Triple-I chief economist Dr. Steven
Weisbart says they can.
How many additional death claims will COVID-19 cause?
As of this writing, officially about 90,000 Americans have died
from COVID-19. In addition, there have been other deaths that seem excessive
relative to “normal” statistics in prior years, suggesting the COVID-19 numbers
are an undercount. It’s also
possible that the “lockdown” imposed nearly nationally in late March,
April, and in part of May, added to the total through suicide, drug overdoses,
untreated conditions that would have been treated and managed in the absence of
the pandemic, and violence.
So,
let’s assume that, for the full year 2020, COVID-19 and related stresses cause
300,000 additional deaths. For simplicity, we’ll ignore any lockdown-related reductions
in deaths – from, for example, fewer traffic accidents, air pollution, and
other causes – that might be attributed to the pandemic.
“It’s
unlikely that all the people who’ve died from COVID-19 had individual life
insurance, since many were age 60 or over,” Weisbart says. “Even if we assume a
third of these were insured – and, further, that two-thirds of younger people
who died also had life insurance – and that all these claims were in addition
to other causes of death, that would be 150,000 claims.”
In 2018, the latest year for which we have data, beneficiaries
under 2.7 million individual life insurance policies received death benefits.
So, although 150,000 additional death claims represent a large human toll, they
would be only a 5.6 percent increase over the 2.7 million baseline.
“That would result in total death benefits being paid to 2.85
million beneficiaries,” Weisbart says. “This is roughly the same as occurred in
2015 and well below the peak of 3.5 million in 2012.”
In other words, even with our conservative assumptions, paying the
additional deaths claims due to the pandemic is well within the industry’s financial
and operational ability.
Will life insurers be able
to pay all the death claims attributable
to COVID-19 that come on top of claims for deaths not directly related to the
pandemic?
Triple-I chief economist Dr. Steven
Weisbart says they can.
How many additional death claims will COVID-19 cause?
As of this writing, officially about 90,000 Americans have died
from COVID-19. In addition, there have been other deaths that seem excessive
relative to “normal” statistics in prior years, suggesting the COVID-19 numbers
are an undercount. It’s also
possible that the “lockdown” imposed nearly nationally in late March,
April, and in part of May, added to the total through suicide, drug overdoses,
untreated conditions that would have been treated and managed in the absence of
the pandemic, and violence.
So,
let’s assume that, for the full year 2020, COVID-19 and related stresses cause
300,000 additional deaths. For simplicity, we’ll ignore any lockdown-related reductions
in deaths – from, for example, fewer traffic accidents, air pollution, and
other causes – that might be attributed to the pandemic.
“It’s
unlikely that all the people who’ve died from COVID-19 had individual life
insurance, since many were age 60 or over,” Weisbart says. “Even if we assume a
third of these were insured – and, further, that two-thirds of younger people
who died also had life insurance – and that all these claims were in addition
to other causes of death, that would be 150,000 claims.”
In 2018, the latest year for which we have data, beneficiaries
under 2.7 million individual life insurance policies received death benefits.
So, although 150,000 additional death claims represent a large human toll, they
would be only a 5.6 percent increase over the 2.7 million baseline.
“That would result in total death benefits being paid to 2.85
million beneficiaries,” Weisbart says. “This is roughly the same as occurred in
2015 and well below the peak of 3.5 million in 2012.”
In other words, even with our conservative assumptions, paying the
additional deaths claims due to the pandemic is well within the industry’s financial
and operational ability.
COVID-19 has changed many aspects of our lives, so it isn’t surprising
to see life insurance markets affected. But some stories create false impressions
that should be corrected.
The story that some life insurers are writing fewer policies “because of COVID-19” has gained traction in both traditional and social media. While not wrong, like other stories involving insurance and COVID-19, it requires context to keep it from wandering off into urban legend territory.
“Life insurers’ ability to keep their promises to policyholders
depends on numerous factors,” explains Triple-I chief economist Dr. Steven
Weisbart. “Among them are interest
rates and how responsibly insurers underwrite policies and manage their
investments.”
Interest rates exceptionally low
What do interest rates have to do with life insurance? Many
products (whole and
universal life and term life for 20 years
or more) calculate premiums in the expectation that, during the life of the
policy, the insurer will earn enough interest from its investments, net of
investment expenses and taxes, to help pay life insurance benefits. Many life
insurance and annuity policies – especially those issued 10 or more years ago –
guarantee to credit at least 3 percent per year.
“Efforts to stave off the recession spurred by attempts to ‘flatten
the curve’ of infections and deaths caused by the virus have led to
historically low interest rates,” Weisbart says.
Gross long-term rates on the investment-grade corporate bonds life
insurers primarily invest in had been 4 percent for most of the past decade and
plunged below 3 percent in August 2019. Since the onset of the pandemic, rates
have fallen even further (see chart).
“So, life insurers – who planned to profit from the ‘spread’
between the interest they earned on their investments and the interest they
credited on their policies – have lately struggled as this spread disappeared
and then reversed,” Weisbart says.
Options are limited
“So, that’s it!” I hear some of you say. “It’s all about rich
insurance companies protecting their profits!”
Businesses must make a profit to stay alive, and U.S. insurers – one
of the most heavily regulated and closely scrutinized businesses on the planet
– have the additional requirement to maintain substantial policyholder
surplus to ensure claims can be paid. Life insurers, in particular, are
required to maintain a special account – the interest maintenance reserve
(IMR).
“The IMR is drawn down when net interest earnings are too low to
support claims – as is the case now,” Weisbart says. “If it’s exhausted, insurers
can draw down surplus, but they can’t draw too much because they’re required to
keep at least a minimum surplus to protect against adverse outcomes in all
other lines of business.”
If their investments aren’t performing as well as expected,
insurers have two options: write less business or charge more for the business
they write.
Exercising a combination of these options is what life insurers
are doing now.
“When interest rates eventually rise, the profitable spread will
return,” Weisbart says, and competition among insurers will likely lead to more
liberal underwriting and lower premiums. “But we can’t predict with confidence
when that might happen.”
Until then, life insurers are tightening their criteria for issuing new policies and, in some cases, raising premiums so they can deliver what they’ve promised their existing policyholders.
COVID-19 has changed many aspects of our lives, so it isn’t surprising
to see life insurance markets affected. But some stories create false impressions
that should be corrected.
The story that some life insurers are writing fewer policies “because of COVID-19” has gained traction in both traditional and social media. While not wrong, like other stories involving insurance and COVID-19, it requires context to keep it from wandering off into urban legend territory.
“Life insurers’ ability to keep their promises to policyholders
depends on numerous factors,” explains Triple-I chief economist Dr. Steven
Weisbart. “Among them are interest
rates and how responsibly insurers underwrite policies and manage their
investments.”
Interest rates exceptionally low
What do interest rates have to do with life insurance? Many
products (whole and
universal life and term life for 20 years
or more) calculate premiums in the expectation that, during the life of the
policy, the insurer will earn enough interest from its investments, net of
investment expenses and taxes, to help pay life insurance benefits. Many life
insurance and annuity policies – especially those issued 10 or more years ago –
guarantee to credit at least 3 percent per year.
“Efforts to stave off the recession spurred by attempts to ‘flatten
the curve’ of infections and deaths caused by the virus have led to
historically low interest rates,” Weisbart says.
Gross long-term rates on the investment-grade corporate bonds life
insurers primarily invest in had been 4 percent for most of the past decade and
plunged below 3 percent in August 2019. Since the onset of the pandemic, rates
have fallen even further (see chart).
“So, life insurers – who planned to profit from the ‘spread’
between the interest they earned on their investments and the interest they
credited on their policies – have lately struggled as this spread disappeared
and then reversed,” Weisbart says.
Options are limited
“So, that’s it!” I hear some of you say. “It’s all about rich
insurance companies protecting their profits!”
Businesses must make a profit to stay alive, and U.S. insurers – one
of the most heavily regulated and closely scrutinized businesses on the planet
– have the additional requirement to maintain substantial policyholder
surplus to ensure claims can be paid. Life insurers, in particular, are
required to maintain a special account – the interest maintenance reserve
(IMR).
“The IMR is drawn down when net interest earnings are too low to
support claims – as is the case now,” Weisbart says. “If it’s exhausted, insurers
can draw down surplus, but they can’t draw too much because they’re required to
keep at least a minimum surplus to protect against adverse outcomes in all
other lines of business.”
If their investments aren’t performing as well as expected,
insurers have two options: write less business or charge more for the business
they write.
Exercising a combination of these options is what life insurers
are doing now.
“When interest rates eventually rise, the profitable spread will
return,” Weisbart says, and competition among insurers will likely lead to more
liberal underwriting and lower premiums. “But we can’t predict with confidence
when that might happen.”
Until then, life insurers are tightening their criteria for issuing new policies and, in some cases, raising premiums so they can deliver what they’ve promised their existing policyholders.
Social media has been abuzz with posts suggesting life insurance claims related to COVID-19 are being summarily denied. Much of the anxiety seems to stem from a news story titled: Would my life insurance policy cover COVID-19 related death?
An anchor for the news organization that aired the piece shared it on Twitter below the tweet:
Will your life insurance cover you if you die from #COVID19?
Well, it depends.
The tweet is accurate enough. As it would be if the reference to COVID-19 was deleted. Or if the tweet referred to another form of insurance.
Claims sometimes are denied.
According to the American Council of Life Insurers 2019 Fact Book, life insurance death benefits paid in 2018 totaled nearly $80 billion, up from $77 billion in 2017. Steadily rising annual payouts like the ones shown in the chart below don’t suggest an industry that spends a great deal of time slithering through loopholes to avoid paying legitimate claims.
“Life insurance claims are rarely denied,” says Triple-I chief economist Dr. Steven Weisbart. “When they are, it’s typically because the policies had lapsed due to non-payment of premium or the policyholders had provided inaccurate or misleading information at the time of application or renewal.”
Even in the event of a material misstatement on a life insurance application – say, the applicant lied about a significant health issue – the insurer has to discover the misrepresentation within a defined “contestability period.”
If the policyholder dies within that period, which typically lasts two years from the date of purchase, Dr. Weisbart says, the insurer can investigate whether the information the applicant provided was accurate. If the policyholder dies after the contestability period ends, the insurer is out of luck.
Insurers don’t make money by rejecting claims. They make money by underwriting accurately, investing wisely, and making customers happy enough to recommend them to friends and family.
Compare the chart above, showing the billions of dollars in death benefits paid, with the chart below showing that contested claims are only a tiny fraction of those paid – and bear in mind that many, if not most, of those contested claims ultimately ended up being paid.
Regulated and closely watched
Insurance is one of the most heavily regulated and closely scrutinized industries in the world, and claims payment is at the heart of the insurance customer experience. Insurers don’t make money by rejecting claims. They make money by underwriting accurately, investing wisely, and – as with any other business – making customers happy enough to recommend them to their friends and family.
Unfortunately, many people – including much of the media – simply don’t understand how insurance works: how premiums are set, what types of risks are excluded (or that exclusions are even “a thing”), and how reserves and policyholder surplus work.
This is demonstrated in some of the contentious discussions around COVID-19-related business interruption claims. In the case of business interruption, most of the denied claims have been against policies that specifically exclude losses related to infectious disease. Moves are now afoot to retroactively rewrite those contracts – to the immediate detriment of the insurance industry and longer-term danger to the people and businesses that depend on insurance – as well as anyone who ever enters into any contract ever again.
I know of no life insurance policy that specifically excludes death from infectious disease. It’s possible some “dread disease” policies that cover specific conditions, such as cancer, might not be paid if COVID-19 – rather than the disease insured against – is deemed to be the cause of death. Or that a life claim might be denied if premium payments were missed or a policyholder smoked or engaged in some other activity associated with high coronavirus mortality that they’d denied on their application less than two years earlier.
So, yes: Some claims may be denied. But such denials are rare and – social media agitation notwithstanding – don’t imply nefarious behavior on the part of insurers.
Financial First Responders
As the economic impact of the pandemic makes it difficult for consumers to keep current on their bills, states have begun to mandate that life insurers keep policies in force, even if policyholders miss payments. At the same time, insurers – facing big financial hits across the many categories of risk they cover (including recent tornadoes and the upcoming hurricane and wildfire seasons) – are doing a lot to support their customers and the communities in which they do business during this crisis.
Insurers are financial first responders when it comes to just about any loss-creating event the average person might imagine. Media organizations would do their consumers a greater service by clarifying that role and helping them understand how best to shop for the insurance they need than by dropping scary, misleading tweets on an already anxiety-filled public.
Social media has been abuzz with posts suggesting life insurance claims related to COVID-19 are being summarily denied. Much of the anxiety seems to stem from a news story titled: Would my life insurance policy cover COVID-19 related death?
An anchor for the news organization that aired the piece shared it on Twitter below the tweet:
Will your life insurance cover you if you die from #COVID19?
Well, it depends.
The tweet is accurate enough. As it would be if the reference to COVID-19 was deleted. Or if the tweet referred to another form of insurance.
Claims sometimes are denied.
According to the American Council of Life Insurers 2019 Fact Book, life insurance death benefits paid in 2018 totaled nearly $80 billion, up from $77 billion in 2017. Steadily rising annual payouts like the ones shown in the chart below don’t suggest an industry that spends a great deal of time slithering through loopholes to avoid paying legitimate claims.
“Life insurance claims are rarely denied,” says Triple-I chief economist Dr. Steven Weisbart. “When they are, it’s typically because the policies had lapsed due to non-payment of premium or the policyholders had provided inaccurate or misleading information at the time of application or renewal.”
Even in the event of a material misstatement on a life insurance application – say, the applicant lied about a significant health issue – the insurer has to discover the misrepresentation within a defined “contestability period.”
If the policyholder dies within that period, which typically lasts two years from the date of purchase, Dr. Weisbart says, the insurer can investigate whether the information the applicant provided was accurate. If the policyholder dies after the contestability period ends, the insurer is out of luck.
Insurers don’t make money by rejecting claims. They make money by underwriting accurately, investing wisely, and making customers happy enough to recommend them to friends and family.
Compare the chart above, showing the billions of dollars in death benefits paid, with the chart below showing that contested claims are only a tiny fraction of those paid – and bear in mind that many, if not most, of those contested claims ultimately ended up being paid.
Regulated and closely watched
Insurance is one of the most heavily regulated and closely scrutinized industries in the world, and claims payment is at the heart of the insurance customer experience. Insurers don’t make money by rejecting claims. They make money by underwriting accurately, investing wisely, and – as with any other business – making customers happy enough to recommend them to their friends and family.
Unfortunately, many people – including much of the media – simply don’t understand how insurance works: how premiums are set, what types of risks are excluded (or that exclusions are even “a thing”), and how reserves and policyholder surplus work.
This is demonstrated in some of the contentious discussions around COVID-19-related business interruption claims. In the case of business interruption, most of the denied claims have been against policies that specifically exclude losses related to infectious disease. Moves are now afoot to retroactively rewrite those contracts – to the immediate detriment of the insurance industry and longer-term danger to the people and businesses that depend on insurance – as well as anyone who ever enters into any contract ever again.
I know of no life insurance policy that specifically excludes death from infectious disease. It’s possible some “dread disease” policies that cover specific conditions, such as cancer, might not be paid if COVID-19 – rather than the disease insured against – is deemed to be the cause of death. Or that a life claim might be denied if premium payments were missed or a policyholder smoked or engaged in some other activity associated with high coronavirus mortality that they’d denied on their application less than two years earlier.
So, yes: Some claims may be denied. But such denials are rare and – social media agitation notwithstanding – don’t imply nefarious behavior on the part of insurers.
Financial First Responders
As the economic impact of the pandemic makes it difficult for consumers to keep current on their bills, states have begun to mandate that life insurers keep policies in force, even if policyholders miss payments. At the same time, insurers – facing big financial hits across the many categories of risk they cover (including recent tornadoes and the upcoming hurricane and wildfire seasons) – are doing a lot to support their customers and the communities in which they do business during this crisis.
Insurers are financial first responders when it comes to just about any loss-creating event the average person might imagine. Media organizations would do their consumers a greater service by clarifying that role and helping them understand how best to shop for the insurance they need than by dropping scary, misleading tweets on an already anxiety-filled public.
