Re-examining Mental Nervous Exposure During the Pandemic

In the early stages of the pandemic, many industries transitioned to a remote work environment to mitigate business interruption. Most companies were surprised to see how smoothly the transition went as many organizations had no other choice but to allow employees to begin working from home. The new environment necessitated the enhancement of current technology, and many insurance carriers made investments that enable online solutions that were previously considered a challenge to fund. In addition, many brokers, once hesitant to embrace online solutions, began to pivot at an unprecedented level. The shift to online-based work environments resulted in accelerated investments in technology across the insurance sector. From electronic applications and policy delivery to creative underwriting solutions and partnerships with new vendors, we saw more technological advancements and change in the last 15 months, especially in the IDI Industry, than in any other similar period in the previous 20+ years.

The question remains: how will these fast-paced changes such as the departure from paramedical exams and consequent change in underwriting requirements impact experience down the road? Carriers and reinsurers are diligently assessing these changes and examining the potential long-term impacts. We’re optimistic about the changes and progress made, however, it is prudent to monitor the new business underwritten using the newer protocols to understand if and how it performs differently from the business written previously.

In October 2020, we made several observations and noted that both Group Long Term Disability and Individual Disability plans include coverage for mental nervous conditions and coverage definitions and periods vary by plan. With the spike in mental illness throughout the pandemic, Munich Re felt it prudent to caution disability carriers to underwrite new business diligently and ensure that they had a clear picture of total exposure across their inforce book of business.

Additionally, we did not anticipate the elevated rate of mental illness to begin to decline until an effective COVID-19 vaccine was introduced and signs of economic recovery became apparent. Since October 2020, the unemployment rate has improved, moving from 6.9% to 6.1% by April 2021 – which is undoubtedly a vast improvement from the 14.8% experienced in April of 2020.¹ But, we still have a long way to reach the pre-pandemic levels of 3.5% seen in January 2020.¹

Mental illnesses such as anxiety, depression, and post-traumatic stress disorder (PTSD), followed similar trends. Anxiety and depression rates across the U.S. population remain significantly elevated. Before the onset of the pandemic in December 2019, the rate of mental illness was 11.3%.² Nearly 37% of the population reported feeling either depressed or anxious as of October 2020.3 The levels continued to increase and reached a staggering 42.4% just two months later in December 2020.³ While it is not uncommon to see an increase in mental illness during the holiday season in general, it’s worth noting that the level increased on top of already significantly elevated numbers. This trend has somewhat reversed since then, as the reports reveal that individuals experiencing anxiety and depression decreased to 32.1% as of April 2021.³ Based on these metrics, one could assume that as more people receive the vaccine and the economy continues its recovery, there is reason for optimism. Nonetheless, as with the unemployment rate, we have a long way to go before reaching pre-pandemic levels associated with mental health.

As previously mentioned,  there is a historical correlation between mental illness and traumatic events. PTSD was the most prevalent long-term psychiatric diagnosis among survivors of the SARS epidemic of 2003, which infected 8000 people and resulted in 774 deaths worldwide⁴ – which pales in comparison to the more than 585,000 deaths and 33 million people infected with COVID-19 in the U.S. as of May 15, 2021.⁵

As of May 24, 2021, approximately 49% of the U.S. population has received at least one dose of a COVID-19 vaccine.⁶ While this continues to trend positively, there are still several reasons for carriers to remain diligent regarding disability risk, including the possible spike in PTSD and other mental illness claims post-pandemic. Carriers should also consider the impact of a long-term, stressful environment that front-line medical workers have endured, including witnessing unprecedented levels death, with little time to take care of themselves, their mental health and their families.

We previously shared guidance for disability carriers offering mental illness coverage, and while the landscape continues to shift, the considerations provided remain relevant. View our considerations here.

Although both the U.S. and the world have come a long way since the beginning of the pandemic, we are not out of the woods yet. As shared above, progress in being made in fighting the virus and we’re optimistic about economic recovery and the continued improvement in overall mental health trends. But there are still unanswered questions that could impact disability carriers. Questions associated with the evolution of the modern work environment, COVID long hauler symptoms, new variants of the virus and industries impacted during COVID-19 that may never completely recover. Munich Re is committed to monitoring and analyzing emerging experience in order to better understand the long-term impacts on the disability market. We will continue to share insights and research on disability trends with our business partners to help them mitigate uncertainty of the future.