Pandemics and the Individual Life Insurance Market: Evidence of the Impact of COVID-19

COVID-19 has led to significant loss of life and has adversely impacted the worldwide economy. While anecdotal evidence indicates a growing interest in life insurance among U.S. consumers during the pandemic, little is known about how the pandemic may have affected the life insurance market. We utilize insurer-state data to create a measure that captures an insurer’s exposure to COVID in each state in which it conducts business. Using this measure to examine the impact of the pandemic on the market for individual life insurance, we find that greater insurer-state COVID exposure is associated with smaller changes in issuances and surrenders in the U.S. We also find that observations with the greatest COVID exposure are more likely to experience declines in issuance and surrender activity. These results indicate that insurers were deliberate with respect to their policy issuance decisions while policyholders kept their policies in force during a period of significant uncertainty. [Key words: COVID-19; life insurance; pandemics; policy issuances; policy surrenders.] JEL Classifications: D12, D22, G22