As obesity levels reach almost epidemic proportions, how is the life re/insurance sector responding? By Nigel Allen

On 10 March 2004, the US House of Representatives voted overwhelmingly in favour of the Personal Responsibility in Food Consumption Act. Affectionately known as the 'cheeseburger bill', the legislation seeks to dam the flow of lawsuits brought against manufacturers and distributors of non-alcoholic beverages and food on the basis of obesity claims, stating simply that each individual is personally responsible for the food they consume. The bill was backed by almost two-thirds of members. Consider this step in the context of the US tort system as a whole, where calls for drastic reform have reached deafening levels to little effect, and the rapid passage of this bill, given that the first major lawsuit filed against fast food outlets on grounds of obesity in the US was by Caesar Barber in July 2002, speaks volumes about the weight crisis.

Body Mass Index

To be classified as obese an individual must have a Body Mass Index (BMI) which exceeds 30. This standard for measuring body fat content, introduced by the World Health Organisation, is based upon a simple calculation: divide a person's weight in kilograms by the square of their height in metres - or alternatively a person's weight in pounds by their height in inches and multiply by 703 (this figures varies slightly, for example the US National Institute of Health suggests 704.5). A person is considered overweight if their BMI crosses the 25 mark, obese if they are above 30 and morbidly or severely obese if they pass 40.

According to a recent study carried out by RAND Health entitled 'Obesity and disability - The shape of things to come', obesity levels in the US have risen steadily over the last 20 years, with levels of severe obesity rising fastest. The Centers for Disease Control and Prevention (CDC), in the 1999-2000 National Health and Nutrition Examination Survey, stated that approximately 64% of US adults were overweight, with almost half of that figure being clinically obese. On a European front, according to information compiled by the International Obesity Task Force, the countries with the highest levels of obesity are Yugoslavia, Greece, Romania, the Czech Republic and England. In the UK, the Department of Health stated that in 2001, 23% of women and 21% of men were classified as obese, compared to 8% and 6% respectively in 1980. Perhaps most alarmingly, global obesity trends in recent years have shown a worrying increase in the number of children now classified as obese. While it should not be assumed that obesity is only a developed world issue, obesity levels in developed countries are higher than transition or developing countries.

At a meeting of obesity specialists in Monte Carlo in March 2003, Prof Philip James, chairman of the International Obesity Task Force, put the global figure for overweight or obese people at 1.7 billion people. "It is clear that extreme forms of obesity are rising even faster than the overall epidemic," he explained, "and we are witnessing a real health tragedy unfolding. In the US, the percentage of black women with morbid obesity - a BMI of 40 or more - has doubled in less than a decade to a rather disturbing 15%. Overall 6.3% of US women - that is one in 16 - are morbidly obese."

He continued: "We are seeing a rapid increase in morbid obesity in Europe too, although with smaller percentages. The data for England show that morbid obesity in women increased 180% while rising threefold among men in less than a decade. One in 40 women in England now has a body mass index so great they are unquestionably in need of immediate treatment for their obesity, but how many are being helped?"

Prof Arne Astrup, president-elect of the International Association for the Study of Obesity (IASO), said: "There is a global obesity epidemic which underpins the increasing levels of non-communicable diseases which are forecast to explode in the next 20 years. It is vital that we take a more serious approach to the treatment of the huge numbers who are obese, as well as introducing effective measures to prevent the problem getting worse."

Mortality rates

The life insurance industry has had little choice but to take up arms in the struggle against obesity. The clearest sign of its impact on the sector is its effect on mortality rates. While recent decades have witnessed a steady improvement in global mortality rates due primarily to advancements made in medical science, a reduction in heart disease and a decline in cigarette smoking, running counter to this improvement is the increase in premature deaths attributable to obesity and in particular morbid obesity.

In March of this year, the CDC released findings which revealed that, while tobacco remained the main cause of death in the US in 2000, accountable for some 453,000 deaths or 18.1% of the overall number of deaths for the year, there were 400,000 deaths related to poor diet and physical inactivity, 16.6% of the total number of deaths. The UK's National Health Service holds obesity responsible for approximately 31,000 premature deaths each year.

In a report, 'Understanding Obesity', the US National Institute of Diabetes & Digestive & Kidney Diseases highlights the number of life-threatening conditions which have been linked to obesity. These include type two diabetes, heart disease, high blood pressure and strokes. The institute also cites the link between obesity and increased rates of certain cancers, stating that there is a higher probability of an obese man dying from cancer of the colon, rectum or prostate than a non-obese man, while obese women run a greater risk of dying from cancer of the gallbladder, breast, uterus, cervix or ovaries, than non-obese. In fact, the American Obesity Association (AOA) has long been lobbying for insurance companies and the US government to recognise obesity as a disease in itself, rather than a condition.

The organisation has succeeded in getting the Internal Revenue Service (IRS) to issue a new policy, which states that: "Obesity is medically accepted to be a disease in its own right." Furthermore, the IRS now provides a tax deduction to taxpayers for the treatment of obesity and conditions such as hypertension that can be improved with weight loss.

However, a problem highlighted by consultancy Milliman in its research report, "Obesity: A big problem getting bigger", is that it may not be possible to accurately assess the impact of obesity on the health of an individual and on the insurance sector, as obesity diagnosis is hardly ever coded on medical claims. The study examined a claims database from group employer-employee coverage for 2001. The analysis process used defined obesity as "the appearance of at least two physician claims or one hospital claim with the following International Classification of Diseases (ICD) 9 codes: 278.00 Obesity, unspecified; 278.01 Morbid obesity." It found gross undercoding of obesity in the claims data, with only 0.3% of those insured including these codes, despite general statistic putting obesity levels at approximately 30%. The report stated: "As obesity has become the focus of policymakers, public health experts and employers, we expect increased emphasis on coding obesity as a primary or secondary diagnosis in medical claims."

The situation is, as Swiss Re put it in its recent report on mortality rates and obesity, quite literally "too big to ignore". The report stressed the importance of practitioners within the life re/insurance industry reassessing both the pricing and underwriting of life insurance products to counter the affects of the current obesity epidemic, particularly at a time when increased levels of pricing competition within the life sector mean that any rise in risk levels, no matter how seemingly insignificant, could result in a major impact on the overall profitability of a portfolio.

Ronald Klein, Global Head of Pricing, Life & Health at Swiss Re, warned the life insurance industry of the financial implications for consumers of life insurance products. "Unless the prevalence of obesity is brought under control, consumers will bear the ultimate cost. As consumers' body mass index goes up, so, too, will their premiums," he said.

The BMI levels are currently used by life re/insurers when assessing applications for life insurance cover. However, Swiss Re believes that such results should be compared to actual mortality statistics and medical studies on a regular basis to guarantee that premium ratings do not fall behind the rise in risks linked to obesity, although it warns that even by carrying out this comparative analysis, accurate pricing levels will still be difficult to achieve. One area of particular concern for the life sector is the sharp rise in obesity levels among children, which extends the risk factor into the medium to long term. The report states that: "Unless the pricing of mortality embraces the possibility of this trend continuing in the future, the industry will be exposed to two key hazards. First and foremost is that the increasing prevalence of obesity will intensify the risk associated with inadequate underwriting ratings. Secondly, pricing bases for these risks may become obsolete in a shorter space of time."

The reinsurer also warned of the need for underwriters to consider whether an applicant for life coverage who is not presently obese has a high chance of becoming obese, a factor which it suggests could then be underwritten at the application stage.

Conclusion

In the Surgeon General's Call to Action to Prevent and Decrease Overweight and Obesity, the US Surgeon General said: "Overweight and obesity are caused by many factors. For each individual, body weight is determined by a combination of genetic, metabolic, behavioural, environmental, cultural, and socioeconomic influences." The myriad factors which contribute to weight problems and obesity ensure that the accurate pricing of life coverage will continue to prove problematic for the industry.

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