Covid Isn’t Done Changing the Life Insurance Industry Just Yet

To start, how life insurance is bought and sold may never be the same for many customers. The pandemic sped up adoption of what is sometimes known as “fluidless,” or accelerated, underwriting. This involves things like heavier use of digital records and less frequently sending a medical examiner into a customer’s home. Many insurers last year increased the size of policies they were willing to underwrite using data-based and predictive methods, according to Manoj Upreti, life insurance-and-annuity senior analyst at Aite Group.

That coincided with another change, an uptick in sales of smaller policies appealing to younger people. Application activity for U.S. life insurance was up nearly 8% year-over-year in 2020 among people under age 44, according to MIB Group’s Life Index. Overall, the number of U.S. life policies sold last year grew even as new premiums fell, according to industry research firm Limra. That is an indicator of growth in the market for relatively affordable, smaller policies.

Bringing a larger number of younger people into life insurers’ pools could reverse a trend toward concentration of risk, says

Chris Behling,

Swiss Re’s

chief underwriter for life-and-health in the Americas. “The more lives we can spread risk out over, the better we can price it,” he says.

But insurers will also have to face the shifting of risk and cost left behind by Covid-19. Initially, the impact of Covid-19 on mortality was dramatic: U.S. life expectancy fell by a year during the first six months of 2020, according to provisional estimates by the Centers for Disease Control and Prevention. That isn’t necessarily a permanent change, but the long-term impact of Covid on life expectancy is still an open question. If the disease becomes less deadly, and if recovering from Covid-19 has no effect on future survival, “life expectancy would return to its previous level,” according to professor Patrick Heuveline of The University of California, Los Angeles.

As of earlier this year, life insurers generally hadn’t increased premiums during Covid-19, though in some cases insurers stopped selling some policies for the oldest customers, according to a review of online policy rates through February by professors Timothy Harris, Aaron Yelowitz and Charles Courtemanche. Mr. Yelowitz says this is indicative of insurers recognizing the risks of Covid, but also the offsetting benefits of lockdowns, behavioral changes and vaccinations on mortality risk.

Still, insurers will have to grapple with how Covid-19’s many social and health changes evolve.

Reinsurance Group of America’s

global chief risk officer,

Jonathan Porter,

has described several potential “pluses and minuses” for future mortality risks, such as the ill-effects of delayed diagnoses and treatments, set against things like the advance of vaccine technology and behaviors like better social distancing during future flu seasons. The insurer is also watching for any “potential reduced immunity from flu” after what was essentially a missed season of infection, Mr. Porter says.

An individual’s vaccination history is generally not considered when underwriting a life policy. Insurers will still have to assess how vaccination rates in the population lower the risk of any resurgence or variation of Covid-19, or to an aggregate reduction in the cost of care and risk if people still get the disease.

Other forms of health risk covered by insurers may also change. The number of claims for things like dental care may be rebounding as people catch up with missed visits, though there is a practical limit on how often people go to the dentist. The risk is whether missed visits created more dental problems and the need for more expensive procedures, like fillings or root canals, that lead to larger claims, notes Erik Bass of Autonomous Research.

In disability insurance, claims for coverage due to a long-term inability to work could be due to rise if there are a large number of people with “long haul” post-Covid symptoms and as government benefits and support offered during the pandemic wane.

So whether it is Covid-19 itself or the many social and medical changes it wrought that linger, insurers will be grappling with the aftereffects for a long time.

Write to Telis Demos at telis.demos@wsj.com