For several years now now, a lot of people involved with insurance—me included —have been puzzling out the ways that new tobacco products like e-cigarettes and snus might impact life and health insurance markets. To date, the U.S. insurance industry has only begun to deal with these questions and few if any products directly take them into account.
However, in the United Kingdom, where a less intense and cumbersome regulatory system for insurance makes innovation easier, the industry appears to be making some strides. The United Kingdom, of course, has a single-provider health care system and only a little more than 10 percent of the population has private market health insurance. But as the Telegraph newspaper reports, at least one broker has succeeded in getting some individuals who use e-cigarettes covered at non-smokers’ rates for life insurance products. The newspaper reports there are doubts about whether this situation will continue persist, because reinsurers haven’t yet decided how to underwrite these risks.
The subject deserves further investigation. As the article notes, a great number of e-cig users are current smokers. Among those who aren’t, most are former smokers. Obviously, the direct health effects of smoking don’t vanish when one quits smoking. Complicating things further, insurers flag smoking as an undesirable underwriting variable not only because cigarettes are inherently dangerous, but also because smoking correlates strongly with many other risk-taking behaviors.
That said, the long and impressive body of research on snus (which is not sold in the United Kingdom) and the shorter, smaller but still substantive body of work on e-cigarettes (which has been sold widely for less than a decade) both indicate these products are significantly less harmful than cigarettes. This doesn’t mean all e-cigarette and snus users should get rate cuts or that every insurer should be forced to recognize the risk differential in their underwriting and rate-setting. But the U.K. experience with e-cigarettes indicates there’s at least some market willingness to take differing harms into account. Even if they don’t want to go as far as some U.K. companies have gone, U.S. life and health insurers should watch the situation closely to see what they can learn.
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