Point of View: August 5, 2004: Obesity impacts life insurance

Obesity represents a potentially serious threat for the life and health insurance industry. Left unchecked, obesity could have a significant effect on mortality and morbidity and thus undermine the substantial improvements in life expectancy recognised over the last 30 years.

For life insurers, the need to understand the potential effects of obesity is key, so that assumptions can be built into ratings, pricing bases and business development plans. At the same time, insurers need to be active in public and private sector initiatives to address the health and social implications of obesity.

Figures from the International Obesity Taskforce show the prevalence of obesity in Australia increasing from about 13 per cent in 1980 to 20 per cent in 1995.

The figures for New Zealand are very similar, according to a Ministry of Health survey, which highlighted an increase in the prevalence of obesity by 55 per cent between 1989 and 1997. The New Zealand survey showed that obesity in New Zealanders aged 15 and over had increased from 11 per cent of the population in 1989 to 17 per cent in 1997.

Why is obesity suddenly becoming such an issue? While science has yet to categorically pinpoint any genetic linkage in relation to obesity, external factors such as lifestyle and diet clearly play a part. There may be other, more complex causes but, in short, obesity is caused by an imbalance between energy intake and expenditure: people eat too much, and do not do enough exercise.

Being obese is dangerous because it increases an individual’s relative risk of death, particularly from cardiovascular disease, cancer and diabetes.

Studies on build and mortality of male subjects in Germany, the Netherlands and the United States show that overweight individuals suffer from a higher risk of mortality than people with a normal weight, with the relative risk increasing sharply as individuals become increasingly obese.

The increasing prevalence of obesity across the developing world has important consequences for the life insurance industry. The relative risks of obesity are more pronounced in several population groups that represent the majority of insured lives: the young to middle aged, individuals who have no previous history of disease, non smokers, and males.

For new life insurance business, the risks associated with obesity must be accurately assessed and rated. Build ratings should be kept in line with mortality experience and medical studies and diligently applied by underwriters. As childhood obesity increases, life insurers need to be aware of a likely ‘cohort effect’ in the future adult population — that is, an increasing incidence of adult obesity as a result of higher childhood obesity.

The way society addresses the obesity problem may have some parallels with the largely successful campaign against smoking. Across the developed world, concerted efforts from a variety of factions have succeeded in reducing the prevalence of smoking, particularly in public venues.

Certainly, from a life insurance perspective, obesity and smoking fall into a similar category. Obesity, like smoking, is a lifestyle choice, and through education and intervention, and a change in public attitudes, it can be successfully tackled.

If mortality trends are to continue to improve, confronting obesity must assume a greater sense of urgency.

Neil Sprackling is chief marketing officer, Swiss Re Life & Health Australia. Swiss Re has recently published a report, ‘Too Big To Ignore: The Impact of Obesity on Mortality Trends’.