Rising mortality rates among the younger population in the U.S. could impact revenues for insurers and reinsurers that cater to lower-income markets, A.M. Best warned.
In the last two years there’s been an increase in mortality rates among younger age groups which could translate into earnings pressure on firms operating in the mid to lower-income marketplace, although older age mortality rates have continued to gradually improve.
These mortality trends are according to two recent studies that have been confirmed by A.M. Best’s analysis of mortality metrics reflected in insurers’ annual statutory statements.
Although the younger population’s mortality rates have risen, data shows a slight decrease in overall mortality last year, signalling a change that could bring re/insurers’ risk assessment for life cover under disruption if it continues into the future.
This slight increase in mortality rates for younger age groups hasn’t yet flowed through to heavily hit insurers; A.M. Best suggested this could be due to this group often not being insured, so only accounting for a fairly small percentage of the insured population.
However, the overall frequency of claims went up last year, and A.M. Best believes that this, combined with current trends of lower mortality rates in some population segments, is a sign that for the overall population, mortality rates that have been slightly improving could see a reversal in future.
Although life re/insurers haven’t yet been heavily impacted by the shifting mortality rate trend, if it continues into the near term future it could have negative implications on earnings for firms exposed to lower-income markets; in the longer term an overall declining mortality rate would call for a reevaluation of risk distribution for the U.S. life segment.