Actuary: Flu Should Not Hurt Life Insurers

A 1918 flu epidemic was the worst disaster to hit U.S. life insurers in the 20th century. It killed about 550,000 U.S. residents and cost life insurers about $125 million, or 0.5% of the country's 1918 gross domestic product. Half a percent of the current U.S. GDP would be about $50 billion.

The 1918 epidemic hurt insurers particularly badly because an unusually high percentage of the victims who died were in their prime working years. During most flu epidemics, flu is more likely to kill children and the elderly.

But insurers, actuaries and regulators have used the 1918 flu epidemic as a benchmark for setting life insurance reserve requirements, and Doug Eckley, a Fairfax, Ga.-based consulting actuary, says insurers should be well prepared for the current flu season.

"Life insurers do a pretty good job of being conservative when setting mortality-related reserves," Eckley says. "They're doing what they should do."

Because heart attacks, lung cancer and other perennial health problems kill so many Americans each year, the U.S. death toll from the flu would probably have to soar into the hundreds of thousands to be more than a small blip on life insurers' radar screens, and the toll probably would have to rise far higher to cause widespread concerns about life insurer solvency, Eckley says.

But a very severe epidemic that killed large numbers of otherwise healthy, working-age U.S. residents could cause headaches for some life insurers with particularly aggressive rates and reserving practices for "super preferred" insureds, Eckley says.

The CDC posts its weekly flu activity summaries at http://www.cdc.gov/ncidod/diseases/flu/weekly.htm