When underwriting current or past drug users there are various ways to minimise the risk of covering unscrupulous policyholders. James Jones tackles the issues
Though not a major problem for the insurance industry, careful risk assessment when it comes to underwriting a drugs history is essential. It was once thought drug abusers were unlikely to be in the insurance market and were therefore self selected out. This is now known to no longer be the case.
The first underwriting stage is an unambiguous, direct question on the application form. The next stage employed by most companies is to obtain a drugs questionnaire. The questions must cover the drugs used, how they are taken, for how long, and when. If there is a chance for terms, a report is obtained from the customer's GP. The GP report may add nothing, but could provide background details, including any psychiatric, or even forensic history. Underwriters then use rating guides provided by reinsurers. Current abuse is not acceptable. With a past history, for life cover, the different drug categories have a postponement period followed by heavy loadings that are time limited. Terms for critical illness cover often involve a permanent moderate loading, while for sickness cover, terms are the most cautious. Cannabis, the least harmful drug, is treated with relative leniency.
The way the drug is taken is crucial. Intravenous drug abuse carries more risks, and this mode of delivery determines if blood tests for hepatitis and HIV will be required.
One problem with underwriting drug abuse is the truthfulness of the disclosures. The nature of drug abuse means recollection of a drugs history can often be limited, even if the applicant is willing to give a full account. Compliance may be lacking and accounts are then limited or contradictory. When there is a lack of co-operation, this may indicate a worse history, or a current problem, and such cases are best declined.
Where ongoing abuse is suspected, one possibility is a urine drugs test. The best time to test an applicant is when they say they have just given up drugs and fall into the high loading end of the ratings. There is a risk they have in fact not given up drugs, and would therefore not be acceptable. A test requires the applicant's consent and all the common drugs are screened for. In practice, an applicant who has lied about discontinued drug use will not attend the test.
A robust underwriting approach to manage expectations at application stage is far better than trying to reject a difficult claim.
Drug abuse
Drug abuse is a feature of most societies as it is human nature for people to experiment and look to alter their mood, whether through natural highs from stimulating adrenalin production or the use of psychedelic substances. Arguably the most used mood changer is alcohol, which will not be considered here.
For insurers, a pertinent question is whether drug abuse is on the increase. The answer here is not a simple one. Trends uncovered by the British Crime survey indicate absolute drug abuse since 1998 appears to have declined or remained stable. However, in the same period cocaine use has doubled with 7.6% of males and 4.3% of females in the 16-24 age group saying they have used cocaine in the past year. Heroin use has remained broadly the same since 2000 and there are new drugs that are growing in popularity, such as the amphetamine crystal meth.
To know more about the lifestyles of potential policyholders it is important to appreciate the impact of drug abuse as well as consider the types and effects of drugs they may be taking.
Amphetamines are synthetic stimulants. Users are seeking a rush, a sense of exhilaration or freedom from fatigue. They are usually taken orally but may be smoked or injected for greater effect. Tolerance develops and users can lose weight, appetite and suffer agitation and insomnia.
Barbiturates, also synthetic drugs, are depressants or 'downers'. They work by depressing the activity of the entire nervous system. They are usually taken orally though can be dissolved and injected. At low doses they decrease motor activity and produce sedation and drowsiness. Paradoxically, they may produce excitement, elation and euphoria, slurred speech and general weariness. At high doses barbiturates further decrease cognitive activity, distort judgement and provoke hypnosis. Even higher doses produce anaesthesia. Tranquillizers are also known as downers but mainly reduce mental alertness, acting in a way not dissimilar to alcohol. Their action is like barbiturates, outlined above, but they are quite different drugs.
Cannabis is a natural drug derived from the plant cannabis sativa. All parts of the plant contain the pharmacologically active compound tetrahydrocannabinol. Cannabis is the most commonly used illicit drug and is usually smoked, though may be ingested. Users are after a sense of euphoria and complete relaxation, the state of being 'chilled out', and can suffer impaired attention and memory problems. This can lead to accidents, even road traffic accidents. Cannabis may produce or precipitate psychotic reactions or disorders. Its users are arguably more likely to try harder drugs as they seek more thrills.
Cocaine is from the South American plant erythroxilon coca. Originally the leaves were chewed by locals to enhance stamina while on a hunt, but cocaine production in South America is now a grave problem. Usually the active compound is extracted from the plant as a white powder. This is sniffed or snorted, but it may be smoked or injected. Cocaine is often the drug of choice for the well off. Crack is a particularly potent variant of cocaine. Cocaine's action is as a powerful central nervous system stimulant that is extremely addictive, and produces sensations of energy, power and elation when taken. Users experience depression, suicidal thoughts, paranoia, insomnia, and agitation. The excited state can lead to violence or involvement in homicide. Cocaine induced hypertension is serious, and can lead to heart attacks and strokes. The snorting habit meanwhile destroys the nasal septum producing an empty looking nose.
Hallucinogens can be obtained naturally from consumption of fungi, for example magic mushrooms or fly agaric, although most hallucinogens are produced synthetically. Hallucinogens alter perception, perspective and sensations, and are normally taken orally. The hallucinations induced by the drugs affect appreciation of time, colours, shape, sound and movement, known by users as 'tripping'. Physical psychological addiction can be strong and prolonged abuse of these drugs can lead to serious mental health problems like schizophrenia. The paranoia associated with a disturbed perspective on life can produce severe persecution complex, violence, suicidal thoughts and homicide. For those using agaric mushrooms, users can die from heart failure caused by these poisonous fungi.
Opium is the natural opiate from the sap of the opium poppy, papaver somniferum. The principle constituent drug is morphine. The poppy will grow anywhere reasonably warm, and the biggest producer of opium is Afghanistan. Heroin is a synthetic derivative of morphine that is injected or smoked. Users experience detachment from worries, nothing seems to matter and there is a sense of euphoria. Tolerance and dependence quickly develop. Larger doses are needed to achieve the same euphoric fix. In the end, doses are needed just to stop withdrawal symptoms, which are rather like severe flu with diarrhoea.
Anabolic steroids are synthetic drugs that promote anabolism, in other words an increase in body mass. They are taken orally or are injected. In a society obsessed with body image, an increasing number of men seeking to build themselves up (body building) or improve their physical appearance, turn to anabolic steroids in an attempt to achieve results fast. Combined with weight lifting and a high protein diet muscle bulk can be increased. Use of these drugs is associated with liver problems, blood pressure, heart disease, aggression and many other impairments.
The main risks of drug abuse are the following:
n Overdose: drug abusers can take too much of their drug of choice. This risk is increased because the strength of drugs cannot be relied on. The risk is also increased if a user has abstained for a period, or has a habit of mixing different types of drugs, a common practice.
n Contamination: to increase their profit, dealers mix various substances with the drugs they are selling to increase the bulk. This practice is known as 'cutting'. Bulking agents can be as varied as talc to bleach powder.
n Virus transmission: drug abusers are often addicts and in needing a fix, take risks, including sharing needles. In this way the viruses HIV, and hepatitis B or C can get transmitted.Some of the most rapid growth in HIV infection is from this route.
n Infective endocarditis: any injection should be done with a sterile needle into a cleaned area of skin into a vein. However, drug injection is often with dirty needles that introduce bacteria into the circulation. Any slight irregularity in the heart's internal structure can be a site of bacterial plaque formation leading to bacterial endocarditis, which may cause permanent damage. The bacteria may proliferate and cause septicaemia.
n Involvement in crime, accidents and violence: drug abusers have higher rates of involvement in all of these and in many cases crimes such as burglary, are committed in order to obtain money for drugs.
James Jones is unlimited underwriter at Friends Provident
