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In recent weeks, there has been a steady release of studies and reports on the impact the COVID-19 pandemic has had on mortality rates.  For instance, a recent news release from Statistics Canada highlighted that COVID-19 was the third leading cause of death in 2020, and with the loss of 16,151 Canadian lives attributed directly to the disease, life expectancy declined by 0.6 years from 2019 to 2020 (which I understand is the largest annual decrease since this statistic was first monitored in 1921).  This news release also noted that the pandemic likely had consequences leading to an increase in the number of deaths due to factors unrelated to COVID-19, namely, the delay of medical procedures and increased substance-related harms. 

Some have argued that tracking death statistics for a single cause of death can be misleading, especially for individuals who die with multiple comorbidities.  But with “Excess Deaths” estimated to be 16,333 in 2020 – a figure which reports that the actual number of deaths were about 5.6% higher than expected – this should leave no doubt of that COVID-19 has had a significant impact on recent mortality trends.

Looking Forward

At this stage, there is a lot of uncertainty as to how the COVID-19 pandemic will impact long-term mortality. 

Some have argued that the long-term impact may not be overly great due to the “harvesting effect”, under which it is hypothesized that the individuals who died during the pandemic already had lower remaining life expectancies (potentially as a result of frailties and other pre-existing conditions), and that the period of excess mortality realized during the pandemic will be followed by a reduction in future mortality.

Furthermore, and as a result of the pandemic, there are likely to be some indirect consequences on future mortality rates.  Some of these consequences may lead to improvements in mortality rates, such as: medical advancements and research, vaccine development, healthier social behaviours to limit the spread of the virus (working from home when sick, hand washing, face masks), and potential lessons learned in long-term care.  Whereas some consequences may lead to a worsening of mortality trends, like: delayed diagnostics, ‘long COVID’, future variants or other viruses, negative social behaviours (mental health, substance abuse, self-harm).

Again, at this stage, it is too early to tell how these factors will play out in the future.

Known Knowns and Known Unknowns

When looking long-term, there are several factors which influence future mortality.  Some are well understood and will lead to impacts that can be predicted in advance; whereas others can be identified but their ultimate impact is unknown. 

Some of the key ‘Drivers of Mortality’ that are reasonably predictable include items like age and gender, marital status, income, economic growth, obesity, tobacco and other substance abuse.  Inherently, many of these factors are interdependent and a product of our personal choice and social construct.

However, there are other ‘Drivers of Mortality’ that could be significantly influential, but whose ultimate impact is highly uncertain.  Such items include climate change, the prospect for medical advancement, antibiotic resistance, and of course future pandemics.

Again, while it is too early to tell how the COVID-19 pandemic will influence long-term mortality rates, I am inclined to believe that this will be a relative ‘bump in the road’ to paraphrase the work of Richard Brown at ClubVita.  But I am an ever-optimist.  Nevertheless, with the Known Unknowns, this may not be the last time we see a shock to the mortality rates in our lifetimes.

What this Means for Pension Plan Sponsors

At this stage, it is too early for plan sponsors to anticipate drastic changes to the mortality assumption that would produce a gain for their pension plans.  Moreover, mortality tables and improvement scales have historically been updated on a relatively gradual basis, and when updates are made, they are often comparatively small when compared to the impact of the sometimes-drastic changes in interest rates which are used for solvency and accounting valuations.