For those in the know, you’ve probably see or heard of the news article going around.
The head of Indianapolis-based insurance company OneAmerica said the death rate is up a stunning 40% from pre-pandemic levels among working-age people.
“We are seeing, right now, the highest death rates we have seen in the history of this business – not just at OneAmerica,” the company’s CEO Scott Davison said during an online news conference this week. “The data is consistent across every player in that business.”
OneAmerica is a $100 billion insurance company that has had its headquarters in Indianapolis since 1877. The company has approximately 2,400 employees and sells life insurance, including group life insurance to employers in the state.
Davison said the increase in deaths represents “huge, huge numbers,” and that’s it’s not elderly people who are dying, but “primarily working-age people 18 to 64” who are the employees of companies that have group life insurance plans through OneAmerica.
“And what we saw just in third quarter, we’re seeing it continue into fourth quarter, is that death rates are up 40% over what they were pre-pandemic,” he said.
“Just to give you an idea of how bad that is, a three-sigma or a one-in-200-year catastrophe would be 10% increase over pre-pandemic,” he said. “So 40% is just unheard of.”
Davison was one of several business leaders who spoke during the virtual news conference on Dec. 30 that was organized by the Indiana Chamber of Commerce.
Most of the claims for deaths being filed are not classified as COVID-19 deaths, Davison said.https://www.thecentersquare.com/indiana/indiana-life-insurance-ceo-says-deaths-are-up-40-among-people-ages-18-64/article_71473b12-6b1e-11ec-8641-5b2c06725e2c.html
Draw your own speculations as to what might be the cause of that. “The data is consistent across every player in that business.”
What could possibly be causing a situation where, given 100 deaths in a year on average +/- a handful, and 110 deaths is an outlier that comes along every 200 years, then you get 140.
Still nothing to see here? Well, since this is out there every place I look, let me try to add some perspective I’ve not seen yet.
Insurance Company Data Is The Highest Quality Data
The reason for that is pretty simple. Not only are there no “conflicts of interest” in getting the data accurate, the only interest is in getting the data accurate, and they have a profit incentive to get the data accurate.
Consider the casino business model. There’s a reason all the games are what they are. Every single game is mathematically/statistically guaranteed to give the house an edge over time. They’re also designed to give the house only a small to modest edge. They want you to win some, lose some—just that most of you lose some reasonable amount more than you won in the context of rational play and entertainment.
The proof of this is the Las Vegas Strip skyline. What “happens” in Vegas stays in Vegas means: your money too! But people still flock because for most, losing money at the machines and tables is still kinda fun as part of the overall vacation experience—though in those rare times when you win on net, it’s more fun.
As an aside, professional casino gamblers aim to shift the small edge for the casino to their favor, and their principal target is blackjack since by keeping track of what’s already been played face up, a skilled player can keep track of the changing odds in his favor or against him and hit or stand accordingly; whereas, the house must abide by strict rules to hit or stand. This is why they don’t deal blackjack from a single deck of cards anymore… But, notice that the most common game for professional players is poker…where you’re playing not against rigged-rules in the house’s favor, but other players.
The point of that digression is that everybody involved wants clear data and to do their best in calculating their risk vs. reward play action based solely upon it. Ironically, Lady Luck is anathema to both casinos and skilled players.
Insurance companies run on the same basic fundamental principles as do casinos, but it’s far more difficult. Casinos have the luxury of dealing with mathematical and statistical absolutes that always hold over time. Insurance companies deal with the serendipity of both nature and human behavior. And they’re a mix. That’s why rate tables are a veritable matrix. On the one hand, you could sell a life or health care policy to a guy who’s a total metabolic mess, so both are going to be expensive. On the other hand, you sell the same guy an auto policy and there’s never a claim because he’s a hyper-competent driver.
So to analogize card-counting in blackjack, the insurance company is always “counting cards” and re-working the odds.
…To be a business concern, you have to turn a profit. Insurance companies turn profits by betting that nothing is going to happen. They lose the vast majority of those bets. Something will happen. When it does, what is the payout they’re liable for?
It gets mind-bendingly complex then, which is why you have limits of liability. A limit of liability is the variable needed—combined with their risk or exposure in terms of all the other variables (age, gender, important health markers, etc.)—to arrive at a premium, that which you pay them to cover you.
It gets even more complicated. All those calculations and your premium isn’t really designed to profit off of providing insurance to you, personally. Even that would not work out. Insurance companies pool risk just like casinos do. If a casino only had one customer, it would be very risky. The one customer could pull a lottery on you, bankrupt you.
Same with insurance. With thousands to millions of customers, most will have spread the costs of their accidents and misfortunes over a long space of time. So, you pay $100 per month, over 40 years of business, and you’ve paid them $48,000 total. Over that same space of time, perhaps you had a total of $30,000 in claims. $18,000 advantage, insurance company. But importantly, you were never hit with a short-term bill of $5,000 or $10,000. That’s what you paid for. When you’re really rich, you can simply be self-insured because those hits don’t matter (rich people do often carry umbrella liability policies, in case they’re passing around the bong in the jury deliberation room).
…And then there are those who pay in the same, but have little to no claims. Still others—like me—who once bought a 2nd home and after paying only a few hundred dollars for the homeowners insurance had a major fire 6 weeks later that cost the insurance company about $200,000.
All of those foregoing things must all be accounted for, analyzed, and worked out in order to make a profit and remain a going concern in order to keep marketing to new customers and maintain sound financial stability to pay valid claims to existing customers when they arise.
And what all that means is that your data must be meticulously accurate so that you can break it all down and compartmentalize and section the risk, so you can be a business and make money whilst having mostly happy customers who keep paying premiums month after month for years.
…Contrast that with the quality of data designed to incentivise spin merchants in the grant-whore community and media in the pay…