COVID-19 is sure to kill you, but life insurance rates haven’t changed

I’m preparing to teach a class at Florida Atlantic University and one of my talking points will be “look at insurance rates if you want to understand the risk of data loss.” In other words, a risk cannot be unquantifiable if there are insurance companies willing to sell coverage for that risk.

Then it occurred to me that we could calibrate our level of coronapanic to what insurance companies are doing. The media informs us that life expectancy has plummeted in the United States. Healthy young people are being felled by the mighty Delta variant and it is urgent for them to get vaccinated (so that the headline can read “Healthy young vaccinated person killed by COVID-19″? See “Nearly 60% of hospitalized COVID-19 patients in Israel fully vaccinated”).

Insurance companies do have a health screening procedure for their larger policies, e.g., trying to exclude those with heart conditions, morbid obesity, etc. If COVID-19 is a significant risk for those the insurance companies consider “healthy” then rates have surely gone up, right?

“Has COVID-19 made life insurance more expensive? These researchers say they have the answer” (MarketWatch, December 2020):

The coronavirus pandemic has produced grim numbers that keep rising, like case counts, hospitalization rates and deaths.

But there’s [one] that hasn’t increased this year: the cost of life insurance.

“We find limited evidence that life insurance companies increased premiums or decreased policy offerings due to COVID-19,” researchers said Monday in a study analyzing more than 800,000 life insurance-policy quotes from almost 100 companies between 2014 and October 2020.

University of Kentucky and Illinois State University economists did discover fewer policies being extended to the oldest of potential policyholders, above age 75. But even then, the cost of those premiums did not noticeably increase.

How are we able to sustain our high level of panic if the insurance companies aren’t adjusting their rates?