COVID-19 Adds Suspense to Dental Insurance

COVID-19 is shaking up a strong, steady health insurance sector: the dental insurance market.

Amy Friedrich, president of the U.S. insurance solutions division at Principal Financial Group Inc., talked about the impact of the pandemic today, during a conference call with securities analysts that was streamed live on the web.

Federal officials have advised dentists and vision care providers to try to control the spread of severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), the virus that causes COVID-19, by closing their offices, or by providing only emergency care.

The level of dental and vision office closures is unprecedented, Friedrich said.

One of Principal's goals is simply to help people return to getting normal preventive care, Friedrich said.

But Friedrich warned that getting routine dental care capacity back to normal may take some time, even after the current shelter-in-place rules start to ease.

Resources

A recording of Principal Financial's earnings call is available here.
An article about Principal's latest numbers is available here.

Principal is hearing from its in-network dentists that their offices will have to operate differently, Friedrich said.

Dentists "are saying that they're going to have to have different cleaning and sanitizing procedures in between patients," Friedrich said. "They're going to have to use personal protective equipment maybe differently than they have in the past. And that might change the speed at which they can see patients on a regular basis."

Pent-up demand for care could end up increasing use of care after June 30, and offset some of the effect of the decrease in dental care and vision care use that Principal is seeing now, Friedrich said.

"But I'm not sure I see that the dental practices can get back to quite the speed they had before," Friedrich said.

Principal has already announced plans to hold group plans' renewal rates steady.

"If we continue to see a path that where people can't utilize our products to get normal care, then we will continue to do things and consider other premium relief," Friedrich said.

Pandemic Response

Friedrich spoke during a call that Principal held to go over its first-quarter earnings.

Dan Houston, the chief executive officer of the Des Moines, Iowa-based life insurer and asset manager, told the analysts that 95% of the company's 18,000 employees are no working from home or other remote locations, with no meaningful impact on the services delivered.

The company has taken steps to help ease burdens on customers, by offering customers more time to make premium payments, and by making it easier and cheaper for retirement plan participants affected by COVID-19 to withdraw assets and borrow cash from their retirement accounts, Houston said.

Executives said they have reviewed the company's mortgage-related investments and believe those investments should continue to well, because of the high-quality of the properties involved, and because of the low ratios of loan value to property value.

The company has said it will continue to pay a quarterly dividend of 56 cents per common share.

The Baseline Pandemic Scenario

Deanna Strable, Principal's chief financial officer, said the company has a baseline scenario that assumes that COVID-19 will kill about 50,000 to 100,000 people in the United States.

The company is assuming that the S&P 500 will drop to about 2,200, from 2878 at press time, sometime between now and June 30, and then return to 2,800 by the end of the year, Strable said.

The Pandemic Impact

Principal has not yet received any COVID-19-related life insurance claims, and it's received only minimal pandemic-related short-term disability insurance claims, Strable said.

Here are some of the effects Strable said she has seen:

Sales: Sales were generally strong in January and February, then quickly took a turn for the worse in March, as the pandemic escalated.
Technology spending: Principal only had to spent $1 million to help employees shift to working at home, because of all of the investments the company has made in technology in the past,.
Retirement plan stickiness: Employers have postponed some moves to transfer retirement plans. That could hurt Principal's retirement plan sales this year but improve client retention.
Retirement plan matching contributions: Only a small percentage of employers have changed their retirement plan matching contribution arrangements, and the total number of participant retirement plan asset withdrawals has been only slightly elevated.
General expenses: Some expenses, such as travel-related expenses, have fallen naturally, and Principal has actively cut other types of spending, such as spending on marketing.

Houston talked some about Principal's plans for bring employees back to the company's offices.

"The first thing I would say is we're going to take our employees' health as the highest priority in terms of how we reload our buildings," Houston said. "It's been heartwarming to see how effective our employees have been working in a remote environment."

Principal expects to see many employees want to come back into a traditional office environment, Houston said.

"I think we're going to be more comfortable with having more flexibility in how people get their work done," he said. "But there's more employees than you might think that are anxious to get back for the collaborative nature, and the friendships."

— Read COVID-19 May Cut Dental Services Spending for 3 Years: Actuaries, on ThinkAdvisor.

— Connect with ThinkAdvisor Life/Health on Facebook, LinkedIn and Twitter.