SIX PLANES DOWN: THE MAGNITUDE OF NICOTINE’S IMPACT ON MORTALITY
Jenna Fariss, ASA, MAAA Director & Actuary Milliman Brookfield, WI Jenna.fariss@milliman.com
Executive Summary The life insurance industry has long held that tobacco-using applicants have 200% mortality across the board. But that rule profoundly understates the risk, because smokers’ comorbidities are far deadlier and their elevated mortality is surprisingly durable, even if they successfully quit. Meanwhile, legacy methods of identifying smokers (e.g., APSs) are less practical as simplified-issue products are more common, fully underwritten policies are often acceler- ated, and customers demand fast and fluidless purchasing experiences. Now that data-driven tools are available and more widely adopted, carriers can instantly and reliably find fact-based evidence of nicotine use in applicants—but they may need to think differently in applying that in - sight in their underwriting processes. This article surveys the latest smoking risk data and explains why tools that highlight nicotine use may be the single most effective way to limit slippage and enhance profitability. The rise of accelerated underwriting and simplified issue products means that fewer and fewer life insur- ance policies are the result of full medical underwrit- ing. Given the limitations of self-disclosure and the fallibility of fluids tests—which have also fallen from favor—it’s critical that carriers understand their op- tions for effectively identifying nicotine use. There are a number of ways to leverage individual medical information to find applicants who are likely to be smokers, including traditional attending physi- cian statement (APSs) and electronic health records (EHRs). Both involve costs in time and money that are no longer compatible with some business models and consumer expectations. Instant and more affordable insurtech tools that automatically retrieve, review
Smoking is an issue that strikes close to home for me. I was born in Winston-Salem in North Carolina, so almost all of my childhood memories are infused with the distinctive smell of tobacco being harvested and cured. Like every other second-grader within 100 miles, one of my school outings was a tour of the R.J. Reynolds cigarette factory. But, if anything, that early exposure strengthened my opposition to smok- ing. In my current role as an actuary and consultant, I’m elbow-deep in mortality data, so I am constantly reminded that tobacco use is the leading cause of preventable disease, disability and death in the US. 1 In 2014, the Surgeon General estimated that there were more than 16 million Americans living with at least one smoking-related disease. 1 The Centers for Disease Control and Prevention (CDC) has calculated that cigarette smoking contributes to over 480,000 deaths annually, as well as costing the US more than $240 billion in health care spending and almost $372 billion in lost productivity. 2 Even 60 years after the Surgeon General’s Advisory Committee on Smoking and Health’s first report, smoking is still a public health crisis and a topic of paramount interest to life insurers. The Boeing 737 is the world’s best-selling large jet. It typically carries about 200 passengers. Imagine six 737s crashing every day; that’s roughly equal to the number of Americans who die each day from tobacco-related causes.
ON THE RISK vol.40 n.3 (2024)
64
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