Policy Documents

How Should Insurers Treat Tobacco Use? A Review of the Research

Eli Lehrer –
July 12, 2012

For insurers, the most salient fact about tobacco use can be summarized simply: overwhelming scientificevidence indicates that all widely used forms of tobacco harm human health. A significant body of evidence also indicates tobacco use correlates strongly with other risky behaviors. According to the Centers for Disease Control and Prevention, furthermore, 19.3 percent of U.S. adults smoke tobacco.

Tobacco users are less healthy than the population as a whole, die more quickly on average, and in many cases engage in a variety of personal behaviors shown to result in policy claims. Thus it is financially advantageous for insurersto consider tobacco use as a rating factor and, in certain business models, refuse to underwrite certain types of policiesfor certain groups of tobacco users.

Not surprisingly, therefore, nearly all life and individual markethealth insurers inquire directly about tobacco use as part of their rating processes and, in most cases, attempt to double-check individuals’ tobacco use through blood or breath tests. Given the overwhelming evidence of harms associated with tobacco, there is nothing unfair about this widespread practice. Indeed, regulators probably would have good reasonquestion the underwriting and rating standards of any insurer that didn’t at least ask about tobacco use.

This paper, however, contends that an ever-growing reserve of data concerning reduced-harm tobacco and nicotine productssuggests some insurers rating some products might considertaking into account the type of tobacco used, particularlyin light of forthcoming restrictions on insurance rating in the health insurance market.

This paper consists of three sections. The first reviews the research about the harms of tobacco and the value of tobacco use as an insurance rating factor. The second reviews scientificwork suggesting that, although no safe tobacco product currently exists, some types of tobacco appear less harmful than others. The final section makes three points relevant to policymakers and life and health insurers interested in gaining a more complete and nuanced view of tobacco use.