How does excess mortality influence insurance companies?

Excess mortality refers to the number of deaths that exceed what is expected based on historical data. When insurance companies observe an increase in excess mortality, it can significantly impact their operations and strategies. Specifically, it prompts insurers to reevaluate their risk assessments. This reassessment is necessary because if there are more deaths than anticipated, it signals that the initial underwriting assumptions may have been overly optimistic or that new risks have emerged that need to be addressed.

For example, if a trend shows higher than average mortality rates due to a specific health crisis or increased incidence of certain diseases, insurance companies may need to adjust their policy pricing, underwriting guidelines, and risk management practices to remain financially solvent. This could involve increasing premiums for certain demographics, adjusting policy terms, or implementing new health initiatives to better manage and mitigate risks.

The other choices do not accurately reflect the consequences of excess mortality: it certainly affects operations rather than having no effect, it does not typically lead to lower premiums due to increased risk, and while trust can vary, excess mortality would more likely lead to concerns about the sustainability and reliability of the insurer's benefits rather than an immediate rise in customer trust. Therefore, the necessity for reevaluation in response to excess mortality underscores the critical role that accurate risk assessment plays