The take-out of new life insurance policies was at clearly elevated levels during the Covid-19 pandemic, shows a recent study by ETLA Economic Research. New business in voluntary life insurance jumped by 20% in the first half of 2020, and the average sum insured also increased significantly during the early stages of the pandemic. The study found that the take-out of new policies increased especially among highly educated people and people with high life insurance deficits.
While the Finnish social security system provides survivors’ pensions for the family, these pensions usually cover only part of the monetary losses resulting from the death of a breadwinner. Many therefore supplement their death cover with voluntary life insurance to maintain their previous living standard. However, most Finnish households do not carry term life insurance that would fully cover the monetary losses arising from the death of a breadwinner. This deficit is called the life insurance gap.
ETLA’s recent study “The Effects of COVID-19 Pandemic on (New) Life Insurances (ETLA Working Papers 107)” shows that the take-out of new life insurance policies was at a clearly higher level during the pandemic. In the first half of 2020, new business in life insurance was 20% higher than in the corresponding time periods in 2018 and 2019. The increase was particularly marked in February and March 2020. The average sum insured also increased by 16%.
The study also found that life insurance demand responded strongly to the number of Covid infections, Covid-related deaths and people tested for Covid: in each measure, an increase of 10% implied an increase of 1% in the number of new life insurances.
In addition to examining the overall responses of insurance behaviour to the pandemic, the study also examined the insurance behaviour of different groups of people during the pandemic. According to Olli Ropponen, ETLA’s chief research scientist in charge of the study, the group-level analysis was the first of its kind in this particular area.
– The results of our study show that during the pandemic, the take-out of new policies increased especially among highly educated people and people who had high life insurance deficits or an existing life insurance policy taken out before the pandemic. These kinds of findings have not been made before. We worked on a more detailed level of analysis than previous studies on the effects of the Covid pandemic on life insurance. This significantly increases the reliability of the results, Ropponen says.
The study made use of individual-level insurance data on new term life, loan protection and joint cover insurance policies and their sums insured in the years 2018–2020.
Funded by Finance Finland, the study is a continuation of the study on the life insurance gap in Finland published by ETLA in 2022.