COVER investigates whether the new life insurance proposition funded by a global tobacco conglomerate has consumers' best interests at heart
Last month we reported that reviti, a life insurer owned by tobacco giant Philip Morris International (PMI), had entered the protection market.
Targeting smokers by incentivising the use of e-cigarette devices over tobacco, the direct to consumer (D2C) proposition - the second start-up venture from ex-Zurich UK board member Daniel Pender - has been polarising opinion across the industry.
Here we take a look at some of the opposing viewpoints, while asking the question: does reviti really have the best interests of consumers in mind or is it more interested in monopolising the e-smoking market?
It is no secret that smoker rates are declining in the UK, and in a big way. Forty years ago almost half of all adults smoked, this dropped to just 15% in 2017, according to the latest ONS report.
Numerous anti-smoking campaigns and bans on public smoking in recent years have helped drive smoker rates down, therefore resulting in improving mortality rates. Great news for UK health, which has seen drops in lung cancer incidence and other smoker related illnesses; bad news for the tobacco industry which has traditionally profited from cigarette sales.
Needing to diversify, many tobacco companies have launched cigarette replacement products, such as e-cigarettes, vaping devices and heated tobacco products. And their usage is on the rise. In fact, just 7% of smokers used the cigarette alternatives in 2012, however this figure now sits at 20%, according to a report by Ash.
It is still relatively early days for cigarette replacement products, and their long-term health impact compared to conventional smoking is still to be proven. While Public Health England suggests vaping is 95% less harmful than smoking, other studies are less optimistic.
As a society, we are engaging more than ever before with the food we eat, physical exercise and lifestyle habits (smoking being one of them), and the protection industry hasn't missed this shift.
Many providers, arguably led by Vitality, now focus on prevention of illness and making it easier for their customers to live healthier lifestyles. By offering incentives and rewards, insurers are able to offer tangible benefits and value to customers from day one, not just at claim stage, increasing the appeal of protection products.
Philip Morris, meanwhile, has capitalised on the vaping trend by offering a range of ‘smoke-free' products, using its IQOS tobacco system. The rise of reviti therefore finds insurgent smoking cessation devices being incorporated into the ‘shared value' prevention approach shown by the more progressive providers in the life and health insurance market.
Dan Pender argues that PMI's movement into this space is a reflection of its forward-thinking approach as a company. "It has embarked on fundamental change to its business that goes beyond tobacco and nicotine-containing products to provide products and services that help people to make better decisions, choose better solutions and lead a better life," he tells COVER.
According to Pender, PMI has a team of more than 430 research and development experts working on its smoke-free portfolio - 300 have "world-class" credentials, he says - and it has more than 2,350 patents granted and over 3,750 pending patent applications for smoke-free-related applications.
"reviti intends to create a significant direct consumer financial services brand which requires significant financial investment," he says. "PMI as our parent enables the vision of this business to become a reality."
Insuring Change's Ruth Gilbert, however, is less convinced. "As with PMI's core product, this sticks in my throat," she says. "I'm not keen on the attempt to use it as part of the strategy to secure dominance for their IQOS device in the smoke-free nicotine market. But if it can do some good by helping some smokers leave nicotine altogether and at least get others the insurance they might not otherwise have had, then I'm prepared to swallow it."
While Gilbert is a fan of life insurance models which help drive health improvements and a supporter of propositions which allow "more bereaved families or cancer sufferers get financial help", she is wary of the agenda driving reviti's approach to premium discounts.
On average, reviti customers who switch to e-cigarettes will receive a 2.5% discount on premiums, people who switch to Philip Morris' heated tobacco product iQOS for three months will receive a 25% discount, and people who quit smoking for at least a year will receive a 50% discount.
"As part of the path to shaking off the very nicotine addiction Philip Morris International have worked so hard to spread around the world, their own ‘scientifically proven' IQOS device is to be promoted," she said. "However, the proof of the degree of reduced risk is being hotly debated, as a quick search of the scientific reviews reveals. And it looks like PMI is to be the judges of when competing devices are so proven."
Dan Pender, meanwhile, argues that the wealth of scientific data related to iQOS - if assessed together with the potential of a product to reduce risk over the medium to long-term - is comprehensive. "There is data to demonstrate that smokers who switch to IQOS are unlikely to relapse (on average, 70% to 80% of IQOS users have quit cigarettes), which makes IQOS a compelling smoke-free alternative for people who would otherwise continue smoking. There's lots of hard work going on in the background to extend our discounts to other products once the scientific evidence and other evidence has been assessed."
Pender points to numerous research papers by government bodies about heated tobacco products which found that 'they expose users to significantly lower levels of harmful chemicals'. "The totality of evidence, which comprises PMI's clinical data, aerosol chemistry and non-clinical data, demonstrates that switching to IQOS completely, while not risk-free, presents less risk of harm compared to continuing to smoke cigarettes," he said.
The UK Committee of Toxicity, for example, found that IQOS and another similar device were ‘likely to reduce risk for smokers', while The German Federal Institute for Risk Assessment (BfR), a branch of the Federal Ministry for Food & Agriculture, conducted a laboratory study which ‘largely coincided' with the findings of one by PMI demonstrating reduced levels of harmful and potential harmful chemicals (HPHCs).
The Russian government commissioned two scientific institutions to conduct research on IQOs, which found that IQOS vapour contains an average of 90% reduction in harmful chemicals and a ‘minimal' impact on biological processes compared to cigarette smoke, while a report by The Dutch National Institute for Public Health concluded that ‘heated products seem to be less harmful to health than conventional cigarettes'.
Independent research by cardiologist and e-cigarette researcher Dr. K. Farsalinos also suggested IQOS has significant harm reduction potential and the Japanese Department of Environmental Health found a reduction in harmful chemicals in the aerosol generated by IQOS compared to cigarette smoke.
While scepticism within the life insurance market - among underwriters especially - regarding Philip Morris is understandable, there are members of the industry who welcome a movement into tobacco-free incentives for smokers.
"It's good to see insurers acknowledging the lower risk presented by new alternatives to smoking, I think it's to be expected that other propositions in this space will emerge," said Alea Risks' Andrew Wibberley, an underwriting expert himself. "As well as the demonstrably lower risk associated with these new technologies that should result in vaping rates being more freely available in traditional products, the improving health and wellness model plays well with insurer thinking at present."
LifeSearch CEO Tom Baigrie adds: "While it's hard to look past the history and desire to promote their vape business, there could be real marketing traction in the intention to encourage the unhealthy to become healthy. I say marketing traction rather than genuine consumer benefit because one would almost certainly get better prices for life insurance elsewhere, and possibly more generous underwriting too. So, what is really happening is that customers would effectively be paying a tobacco giant for a healthy living app."
reviti's decision to provide the biggest discount to those who do not use their products could either be seen as a genuine attempt to push towards a smoke-free world or just a sign of confidence that people will never give up completely, while Philip Morris' spending capability has no doubt allowed for investment into an area of the marketplace where others start-ups might naturally fall short financially.
Whatever the agenda, though, it certainly has not won the heart of Matthew L. Myers, president of the Campaign for Tobacco Free Kids. He said: "It doesn't get more twisted than a tobacco company hooking people on its deadly products, then turning around and trying to sell them life insurance. Philip Morris is looking to profit any way it can from its addicted customers. Where will Philip Morris diversify next - perhaps into funeral homes, with Marlboro-branded coffins?"
With the industry divided, the heated debate continues…
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