According to a recent report by the Department of Health, more than 12 million adults and one million children will be obese by 2010. How may this affect the overall price of protection premiums and could it lead to more or fewer people buying life insurance overall?
Market Views
Deepak Jobanputra, Swiss Re
With links to cardiovascular disease, hypertension, diabetes and many types of cancer, the effect of obesity on public health is becoming an increasing concern worldwide. A significant risk is attached to the young, particularly through type 2 diabetes. Studies show that the likelihood of overweight children continuing to be obese in adult life increases with the age of the child, and there is evidence of a link between increased adult cardiovascular disease mortality and childhood obesity.
Clinical evidence indicates that the increase in relative mortality risks associated with obesity is more pronounced among the insured population.
It is, therefore, critical that the industry applies the appropriate underwriting ratings for such risks, though there are competitive pressures to limit ratings for overweight and obese applicants. In the long term, if the obesity trends we are seeing among the younger generation continue, this could produce a 'cohort effect' that would need to be reflected through adjustments to base-pricing. This would run counter to the mortality improvements that we have been experiencing in recent years.
Applying the principle of charging a fair price for each risk, an increasing prevalence of obesity clearly has the potential to filter through into higher prices for those at greatest risk. For the vast majority of applicants, however, life cover should continue to remain an affordable and attractive proposition. Given that we have an estimated £2.3bn life assurance protection gap, there is no doubt that there is a need for life protection.
David Rosier, Otter Risk Solutions
Mortality rates are periodically adapted based on emerging population and insured lives experience. Logically, any impact of increasing levels of obesity will only affect rates as part of this ongoing process.
What is more probable is that this increased level of awareness will influence the risk assessment process, particularly for protection products. Underwriters may become more diligent in determining whether the obesity has had a direct or indirect impact on the health of the applicant.
Height and weight tables for determining levels of obesity are well established and while there may be some adjustment to a more conservative basis it is unlikely there will be dramatic changes.
Another area of interest will be the growth in the number of obese children, the effects on the development of associated impairments and the adequacy of premium rates at the youngest ages. Arguably, young adults could be the group where most change occurs in terms of medical evidence requirements and underlying premium rates.
Overall, current obesity projections are unlikely to have a dramatic impact on premium rates. Changes in risk assessment processes will probably be gradual and based on established medical opinion.
Christine Gallagher, Scottish Provident
A body-mass index of 30 or above is considered obese. The risks associated include diabetes, cardiovascular and cancer, which are only three examples from a possible list of a frightening 42 obesity-related diseases.
Weight can also bring its fair share of non-disclosure problems as most of us underestimate, innocently, how much we weigh.
Being under-height for your weight causes a small rating and what the underwriters call a small rating can increase the cost of CI cover dramatically. We know cost is important for clients and believe ratings will lead to fewer policies being written. But we have to remember that the most expensive policy will be the one we do not have when money (especially a lack of it) during illness is a priority and this is where advice plays an important part in a client's portfolio.
Roy McLoughlin, Master Adviser
One of the most sad indictments of fitness levels in society is if you take a stroll around your local park late afternoon or at the weekend. Not so long ago it would have been full of children with jumpers for goalposts, but now the closest most come to playing football is on their Playstations. While this is fantastic news for Sony, it makes a depressing sight and, as we all know, has huge ramifications to what is happening to our society.
The US aside, we are now officially the fattest nation on the planet. Not only are we unfit, we are also becoming alarmingly obese and the Department of Health figures cast a worrying shadow over the future health of our once sport-obsessed nation.
I recall only one client, in years of advising, who I had to have an 'awkward' conversation with once the insurance company had imposed a loading. These conversations could also start to become more common and as advisers we are certainly looking at height and weight during proposal and second-guessing whether a problem may arise.
While the current obsession with body mass is exaggerated – for example, Johnny Wilkinson is technically overweight – insurers are loading/rating increasing numbers and one cannot see this trend reversing.
Therefore market forces will almost certainly affect the overall price and there is a danger that people will feel uneasy about purchasing cover if they perceive that they have a weight problem. In particular, CI ratings are usually slightly higher than life rates due to the higher chance of heart attack or stroke.
It is difficult to see this trend reversing as it is a social problem that the Government does not seem to be able to reverse.
Let's try and fill those parks again or business and future world cup victories will become even more unlikely.
