COVID-19 and Its Impact on Disability & Life Risk

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Helping clients understand COVID-19’s influence and what it means going forward 

Reflecting on how the COVID-19 pandemic affected the (re)insurance environment provides insights into how such a stressor affects risk in the disability and life marketplace. At the same time, reactions from the pandemic provide a glimpse into how society might react to similar events in the future.

In this episode of Fo[RE]sight, Meg O’Neill, Vice President for Underwriting & Thought Leadership, and Rick Leavitt, Actuary and Managing Director of Smith Group, a disability reinsurance risk manager and consulting firm wholly owned by Guy Carpenter, take a historic look at the pandemic, how the virus evolved, downstream effects, and lessons learned about data handling and strategies.

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Our goal for this series is to bring to listeners unmatched insights on trending challenges and solutions, delivered by specialists from Guy Carpenter and other organizations on the forefront of thought leadership developments.


Eric Stenson: I’m Eric Stenson from Guy Carpenter. Welcome to this episode of Fo[RE]sight, a Guy Carpenter Podcast Series, bringing you unmatched insights on trending challenges and our solutions, delivered by Guy Carpenter experts on the vanguard of thought leadership within the reinsurance industry.

Today, Smith Group, a disability reinsurance risk manager and consulting firm that is a wholly owned subsidiary of Guy Carpenter, presents Meg O’Neill, Vice President for Underwriting & Thought Leadership, and Rick Leavitt, Actuary and Smith Group’s Managing Director, who will discuss COVID-19, its impact on disability and life insurance risk, as well as whether we’re now better prepared for the next pandemic.

Over to you, Meg…

Meg O’Neill: Thanks, Eric. Let me set the stage for this conversation. Over three years ago now, little did we know that in the early months of 2020, COVID-19 would wreak havoc across the globe for the next two-plus years. Many American workers set up shop at home, students of all ages were required to attend classes virtually, and numerous businesses shuttered their doors.

We watched as hospitals across the country struggled to treat an unknown disease that resulted in immediate death for hundreds of thousands while maintaining treatment and requisite care for the ongoing health demands among the rest of the patient populations. Recall that Americans were strongly urged to isolate and mask to avoid contagion and spread.

Over the span of two and a half years, the US economy halted, wavered, and stalled many times over. While Americans struggled to take care of our own, scientists and infectious disease specialists the world over rushed to find a vaccine and treatments that could save lives.

In the three years since the onset of what would become the first pandemic in decades, what have we learned? For this we’ll turn to Smith Group’s Rick Leavitt, who has become somewhat of a guru on the subject of COVID-19 since being asked early on in the pandemic to help make sense of the data.  

Rick, my first question is relatively simple: how in the world did you end up spending so much time on COVID?

Rick Leavitt: That's a good question, because I really was not much of a group life actuary, or mortality expert. My getting involved was very much a defensive reaction. I think we all remember the early days of the pandemic, when things were very confusing. The news was chaotic, and I was getting a lot of questions from our clients, both about what the impact would be on group insurance but also more personal questions about really what's going on, and I really didn't know how to answer these questions.

When I tried to figure this all out from the media coverage, I just couldn't make sense of it. And so at that point I decided that for me it would be better just to collect as much of the raw data as I could, and do my own analysis. I could then share that analysis with actuaries as a way to start answering the questions.

So that's how I got started, and in the end, I really began to enjoy it. It's a bit of a morbid subject, of course, but to have regular data updates and be able to test models and then see how they play out was really interesting to me. It has also given me a way to communicate regularly with many people in our industry, and doing this has enabled me to feel better connected. So, I've been continuing to do it, and I currently have about 250 people that receive what is now a weekly update.

Meg O’Neill: Wow. OK, that's impressive.  So knowing that you have that data in front of you, and have had the benefit of reviewing it over time, can you give us your sense of the future path of COVID? In other words, where do you think it's headed from here?

Rick Leavitt: My official answer to that is, I don't know. The course of the virus has been very hard to predict all along. I have spent some time seeing what the epidemiologists say, and I think most of them are fairly optimistic. The COVID numbers have been dropping pretty consistently since the beginning of the year.

They continue to drop, and so far there are no signs that we're going have another surge in the near future. So, despite all the good news, there's always some potential that the virus will mutate and turn into something that's worse. 

Meg O’Neill: Well, Rick -- that sounds very interesting. Can you elaborate?

Rick Leavitt: I did read a blog from one epidemiologist where she suggested there was about a 20% chance of a significant surge in the next year. And so we're not quite out of the woods yet, but the signs are good, leading to some optimism. Currently, the level of death is sort of like a bad flu season.

The other thing to understand is that the virus mutates about twice as fast as the flu, and so in the future we might expect some bad COVID years … maybe twice as often as bad flu years … something like that. So, it's not going to go away, but I think it is most likely we're not going to have any significant outbreaks like we had during the heart of the pandemic. However, since the end of the emergency mandate on May 11 not all COVID reporting has been timely or complete, and so I have heard the opinion that the current levels may be understated.  I can’t really weigh in on this question, which is why it is important to continue to review overall population mortality.

Meg O’Neill: Thanks, Rick. That clarifies a lot and sounds pretty reassuring. You mentioned the overall death rate, so what about overall mortality… When do you think things will feel normal again relative to COVID?

Rick Leavitt: Right. That’s certainly the primary question that I'm getting these days: What's going to happen with overall mortality? One of the things to understand is that for younger working ages, which I would classify as 25 to 55, or something like that, there’s been a significant jump in mortality, even excluding COVID. That increase started at the beginning of the pandemic and persists even now. So, these age groups are still running 15-20-25% above the pre-pandemic expectation for deaths, with males being particularly hard hit.

This is a subject that many people are spending a lot of time researching both in the academic world and in institutions like the Centers for Disease Control and Prevention (CDC), and in the life insurance space. So, there's a lot of research happening that's trying to figure out what is going on, and I'm certainly not up to date on all of it. But, I have had conversations with quite a few group life actuaries, and I think a there is a consensus emerging that I can comfortably share, feeling confident I am not too far off base.

Meg O’Neill: So, how would you break this down?

Rick Leavitt: I think there are 3 broad categories of things that are happening. One is just that there are downstream effects of getting COVID. So, most of us have had COVID and skated through it fine, maybe with a little residual cough that lasted for a while, but basically recovering our full health. But if you already had poor health when you got sick, then the disease increased your chance of dying. That affects things like heart disease, diabetes, and other underlying chronic conditions like cirrhosis of the liver. We see elevated deaths in all of those categories. The thinking is that these are people who did not die from getting COVID, but their health was made worse. These deaths results from downstream effects of getting COVID.

Meg O’Neill: So, what about the second category?

Rick Leavitt: The second category is as a result of the social disruption that was caused by the pandemic. So, these are indirect effects. Some of the simple ones would be due to people not getting their medical screenings or preventative check-ups, and also not going to the doctor if you have chest pain or some other worrisome condition. These are disruptions in care caused by the pandemic.

However, there are also a whole host of other elements that are contributing, including people being socially isolated, people losing their jobs, losing their ability to earn money, and also we can't discount the stress and worry caused by the pandemic itself. The uncertainty associated with pandemic, concern about loved ones, etc., all can contribute to worse physical and, in particular mental health. We hear a lot about the mental health aspects in the media and we see it in disability results. All of that collateral damage is contributing to adverse health, which leads to increased mortality that cuts across a whole bunch of different types of health conditions. These are indirect impacts from the pandemic.

Meg O’Neill: What would the third category indicate?

Rick Leavitt: The third category really has to do with external trends that are not directly related to COVID, and that existed pre-pandemic.

Overdoses are a big part of this third cause. Drug overdoses in this population were growing in the early part of the 2010s, but seemed to flatten out in the middle of the decade. However, these had already started to grow, pre-pandemic, but they really spiked up when the pandemic hit.

Meg O’Neill: And I have a feeling there is more to discuss here.

Rick Leavitt: There certainly is. There's a whole host of external causes where mortality is up. This includes things like homicides and accidents, both motor vehicle and non-motor vehicle accidents.

The idea is that some of these trends really have to do with the economic disempowerment of a large portion of people within the population. A lot of the media refers to these as “deaths of despair,” but I would characterize it as increasing death due to unhealthy or risky behaviors that themselves are at least partially due to a lack of optimism or hope about the future. There is definitely a socioeconomic aspect to this. You don't feel as though you have access to healthcare or fulfilling or gainful employment, and this pessimism contributes risky behaviors that ultimately leads to more deaths.

It is important to understand that the second and third categories cannot be cleanly separated.  There has been a lot of media coverage about how the pandemic hit the economically disadvantaged worse, so it exacerbated many existing trends.

Meg O’Neill: How are you thinking about each of those reasons and the future of those different reasons? Will some be more prominent, for example, in impacting mortality than others?

Rick Leavitt: I think the categories are useful since the future expectations and possible responses are different. The first category of COVID-related deaths should follow a path similar to the disease itself, with perhaps more of a time delay.

We don't really know how long the residual effects of COVID are going to last. Those deaths are not going to decline as rapidly as the COVID deaths themselves, but they should decline over the next one to two years. If the pandemic continues to fade away, then I would expect those deaths to fade away as well.  

Meg O’Neill: How do you think the passing of time will affect these issues?

Rick Leavitt: To a certain extent, some of the effects of the social disruption should decline as well but with likely a longer time horizon. In other words, as we get farther from the peak of the pandemic things are going to return more to normal.

I have even heard discussion about the fact that after surviving the 1918 flu, society entered into an exuberant and optimistic phase. I'm don’t think we're quite there yet, but we may start feeling better about the future in general, having made it through a dark time. I don’t know to what extent this will impact health and well-being, but it seems potentially positive. Regarding the third category, the external trends: I really don't know. I think there are a lot of social ills that we’ll have to continue to try to understand and manage.

Meg O’Neill: Can you tell us more about these external trends?

Rick Leavitt: It's important to understand that we are in the beginnings of a significant economic disruption that’s brought about by the rise in automation and increasing dependence on artificial intelligence. It's hard to say whether in the end there's going to be more jobs or fewer jobs, but there's no doubt that there's going to be significant winners and losers from the economic changes.

Meg O’Neill: Can you tell us more about these winners and losers?

Rick Leavitt: Those who get left out or left behind by the changes are going to struggle to find meaningful and gainful work, which leads to the feelings of hopelessness that we think is driving a lot of this excess mortality. At this point, I don't know whether we have the social will to try to remedy those problems. But since we are only beginning to see economic upheaval, I would guess those trends will continue to worsen, unless we decide individually, collectively or societally to try to figure out how to how to reverse these trends.

I think it is also important to stress that within groups of people with group life coverage, I think the improvements will come more quickly. People who are employed at a job with benefits will tend to do better than those without.

Meg O’Neill: So, when do you think we are going to return to mortality levels that existed pre- pandemic?

Rick Leavitt: I don't know. I’m not entirely pessimistic, because there are other trends, such as improving medical care and our ability to deal with a lot of diseases, which I expect are going to continue. I believe that, ultimately, we'll be back on the path of generally improving mortality, but I don't know how long that's going to take: a few more years, at least, and more quickly within the group insurance market than in the total US population.

Meg O’Neill: You’ve talked about mortality, but what about disability? Specifically, what did we see in terms of incidence and termination rates? 

Rick Leavitt: That one's a little hard to say. For short-term disability, we saw two things going on. We saw a significant bump in short-term disability claims due to actual COVID claims, and those we expect to fade away, as the pandemic fades away.

Generally, though, short-term disability claims, excluding COVID, have been lower than pre-pandemic levels. I remain concerned about the increased level of mental health claims, but aside from that, I think the lower claim levels are at least partially due to the ability for many people to work from home. And while remote work or work-at-home options were growing even before the pandemic, there is no doubt that the trend accelerated significantly during the pandemic.

That has been a positive effect for both short- and long-term disability. As people gradually return to work at the office, you might expect some of those claims to come back, but I think in general this is a good trend for disability.

Meg O’Neill: We’ve heard a lot about sufferers from Long COVID. How has that affected disability claims?

Rick Leavitt: We really haven't seen much significant impact from Long COVID claims. Generally, long- term disability appears to be pretty good. It’s probably largely driven by the work-from-home environment, or the flexibility associated with employees working from home. And so I don't expect any real significant changes in long-term disability over the next few years.

As the pandemic fades away, we're a little worried about the rise of mental nervous claims in short-term disability, and that does bleed somewhat into long-term disability. And so we're keeping an eye on that. But at this point in time I'm fairly bullish about long-term disability.

Meg O’Neill: Given all that you’ve learned, what do you think about our ability to respond to the next pandemic?

Rick Leavitt: I think there are both positive and negative signs. Our ability to develop and deploy the vaccines so rapidly was a significant positive achievement. This was possible due to all the scientists who had been working on these techniques for years before the pandemic began. They were working in relative obscurity and with less-than-desirable funding. I think going forward there is going to be both more interest in these lines of research, as well as more government funding, so I am optimistic that our ability to response will be improved. 

I also think this pandemic exposed weaknesses in our traditional public health institutions such as the CDC and World Health Organization. The early days were very chaotic and uncertain, so I don’t really fault these organizations for being caught flat-footed, but I know they are working now on improving their technology, their data-handling ability and their communication strategies, so the ability to respond should be improved. Of course, the further in time we get from the last pandemic, the easier it is to forget the urgency. So, these advantages may fade over time.

Meg O’Neill: You’ve given positives and negatives that could affect society’s ability to handle the next pandemic. What would you want to change about the response to the COVID pandemic that can affect how we deal with future pandemic outbreaks?

Rick Leavitt: What is disappointing to me is the general societal response. It is regrettable that pandemic responses—from masking, to social distancing, to vaccine utilization—have all become highly politicized. On top of that, we are living in an era of increasing misinformation, mistrust of traditional authority, and conspiracy theories.

All of this is driven by people doing quote/unquote “their own research,” using computer algorithms that are designed for increased engagement on social media for the purposes of selling advertisements, and not for assessing the truth or falsity of any claim. All of this creates an environment where it is increasingly difficult to implement the optimal social and medical response, even if known, and personally I do not see a clear path out of this problematic social environment.

I fear the potential that the next pandemic can be much worse than this one in terms of overall mortality, and it remains to be seen whether a much more dire and dangerous disease will override the social barriers to adopting the best response.

So, all in all, I don’t know, but I do come away from this experience being a big believer that our education should include critical thinking, science and probability education, and the skepticism and humility to recognize that not everything we believe is necessarily true.

Meg O’Neill: Thanks, Rick, for that interesting perspective.

I’d like to recap just what we discussed for our listeners. First, we learned how and why you became interested in following COVID-19, and how you gained a sense of how it might look in the future, in that it is very likely that COVID is here to stay. Next, you shared how pre-existing conditions and factors impacted COVID-related mortality rates, and that all in all, disability incidence rates have stabilized. In fact, you said you were pretty bullish on long-term disability.  Do you think that sums it up?

Rick Leavitt: Yes, that’s right. Thanks, Meg. This was a great opportunity to share some of the insights I’ve gained over the last few years. 

Meg O’Neill: Before we sign off, Rick, I think it would be helpful for us to share with our listeners a little more about Smith Group and what we do in the group disability and life space to help support our clients. Why don’t I provide some insights about our underwriting and claims area, and maybe you could talk about our actuarial expertise and services?

Rick Leavitt: Yes, sounds good to me. 

Meg O’Neill: For those unfamiliar with us, Smith Group is a wholly owned subsidiary of Guy Carpenter.  We are a group of 12 employees with an average tenure in the industry of over 20 years. Our sweet spot is in the group reinsurance disability and life space, where we offer our clients claims and underwriting support on a consultative and transactional basis. Whether hashing through a difficult claim with a client, offering a second set of eyes on a new risk, or providing industry insight through white papers, surveys and webinars, we excel in thought leadership. At its core, Smith Group is a creative, technical and forward-thinking organization that provides customizable solutions for our clients. 

Rick Leavitt: Thanks, Meg. From an actuarial perspective, Smith Group stands out for our unique and long-view perspective on risk. We have always focused strictly on group Insurance products: primarily disability, but now also group life, and paid family and medical leave, and so most of us have more than 20 years with these products. This means we bring a significant depth of experience and knowledge into our work. We focus on technical and empirically-based data analysis. That combination of many years of experience, along with the ability and desire to get our “hands dirty” on nitty-gritty data work, gives us a particularly unique expertise in our market.     

Meg O’Neill: Thank you for your time, Rick. I really enjoyed this conversation.

Back to you, Eric. 

Eric Stenson: I’m Eric Stenson and thank you to Smith Group’s Meg O’Neill and Rick Leavitt for sharing their insights on how the COVID-19 pandemic has affected mortality and disability rates, and how responses to the COVID environment can provide a glimpse into how society might react under future pandemics. Anyone wanting to learn more, or who would like to engage with a Guy Carpenter expert directly should visit guycarp.com and click on Explore Solutions.

Please look for the next episodes in our series, as we address additional themes connected with the reinsurance environment. And thank you to our audience for sharing this time with us and listening to Fo[RE]sight, a Guy Carpenter Podcast Series.