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  • July 2018
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The Vape Debate: E-Cigarettes and Underwriting Risk

Vaper blowing smoke in the distance
In Brief

Smoking cessation has been a large contributor to improving mortality over the past few decades and tobacco use, amongst adults and teens, is at an all-time low. However, the trend of vaping and e-cigarettes has exploded. What are the implications for insurers?

Smoking cessation has been a large contributor to improving mortality over the past few decades and tobacco use, amongst adults and teens, is at an all-time low. However, the trend of vaping and e-cigarettes has exploded, bringing back nicotine in a fun-filled, flavored way. 

Proposed regulations

I scanned a news article the other day on the proposed tighter South African smoking regulations (the Tobacco Products Control Amendment Act) and immediately thought of the potential increase in e-cigarette usage locally.

At the bottom of the article, however, I spotted that the proposals look to regulate e-cigarettes, which, up until now, have been largely unregulated.

In many countries, there is little if any regulation of e-cigarettes. While our vapers will not take kindly to greater restrictions in public places, regulation may provide benefits in ensuring effective quality control in the production of e-cigarettes, and possibly address concerns regarding advertising, packaging and health claims.

Two sides of the story

There is a general global debate about the benefits and potential harm of e-cigarette usage. Those in favor of vaping claim it is much healthier than tobacco smoking and a successful cessation tool, while others believe there is uncertainty in the risks and a new generation of tobacco users is becoming hooked.

Since smoking habits begin during the teenage years and early twenties, there is a major risk that e-cigarettes will help to revive the popular smoking culture that has taken decades to dismantle.

So while this global debate unfolds, what does this mean for insurance premiums for those that have switched to e-cigarettes?

Insurance pool of e-cigarette users

One would think that from a health perspective, alternative forms of smoking cessation such as nicotine patches and Nicorette gum and lozenges are a better option for stopping smoking than e-cigarettes. From an underwriting perspective around the world, those using nicotine replacement therapies have long been considered to still be smokers by the insurance industry and e-cigarettes, therefore, are treated the same way.

One study has found that e-cigarette use is not necessarily associated with higher rates of quitting or reducing smoking and hence a large proportion of e-cigarette smokers are still smoking tobacco cigarettes. Meanwhile there is a trend, due to marketing efforts, for those who have never smoked to use e-cigarettes. This is mostly confined to the very young population (16- to 25-year-olds); this “healthier” pool is typically not buying life insurance yet.

Putting aside the younger population, studies in the United States show that e-cigarettes are mainly used by ex-tobacco smokers. This suggests that the insurance pool of e-cigarette users still has a higher underlying mortality which may be similar to those of smokers, at least initially.

There is still uncertainty

There is a lot of literature about the make-up of e-cigarettes suggesting that e-cigarettes contain significantly fewer chemical ingredients than tobacco; however, Poznanski et al. (2017) indicated that various analyses of particles in e-cigarette vapour have shown its similar composition to regular cigarettes.

One of the concerns around the latest e-cigarette devices is the fact that they have adjustable features (such as variable voltage and air flow), and users may modify these at home to alter the delivery of nicotine. Having a good understanding of the implications of this on health is very difficult to analyse.

One recent medical study looking at the immediate impacts of smoking on blood vessels and e-cigarette users does show altering effects when vaping, which has created concern around cardiovascular risks. Most literature generally concludes that there is still uncertainty and more time is needed for data and experience to emerge.

The challenge for insurers is verifying whether someone at the underwriting stage is an e-cigarette only smoker, tobacco smoker, or both, and to determine the exact amounts smoked. Cotinine tests, performed at the underwriting stage, don’t prove whether someone is a smoker or a vaper, since they show positive for tobacco and all forms of nicotine replacement including e-cigarettes. That means we are back to relying on policyholder disclosure. The next consideration is that data suggests there is a higher risk of vapers transitioning back to tobacco smoking. As vapers could potentially access cheaper insurance premiums, measures need to be taken to develop a new approach to testing in order to avoid the incorrect identification of tobacco cigarette smokers as vapers.

This got me thinking, what did my husband declare on his insurance application?

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Meet the Authors & Experts

Leza Wells
Chief Pricing Actuary, RGA South Africa

Additional Resources

Originally published in FA News, April 2018.