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Are E-Cigarettes Putting a “Drag” On Life Insurance Sales?

Is the profile of the traditional tobacco user going “up in smoke?” (cough, cough)

Everyone seems to be weighing in on “e-cigarettes” – from the FDA, to WebMD, to major news outlets like CNN, and everyone in between. What are they, and why are they all the buzz in the life insurance industry today?  So all smoking-related puns aside – what’s the deal with e-cigs?

Wikipedia defines an e-cigarette as “An electronic cigarette (or e-cigarette), electronic vaping device, personal vaporizer (PV), or electronic nicotine delivery system (ENDS) (not to be confused with smokeless cigarettes) is a battery-powered device which simulates tobacco smoking. It generally uses a heating element that vaporizes a liquid solution. Some solutions contain a mixture of nicotine and flavourings, while others release a flavoured vapor without nicotine. Many are designed to simulate smoking implements, such as cigarettes or cigars, in their use and/or appearance, while others are considerably different in appearance.” (1)

Basically, an e-cig is classified as a smoking alternative; the majority of them are designed to simulate the experience of smoking an actual cigarette, and are available in a variety of options, including both with and without nicotine (the major addictive drug in tobacco). They have been quickly gaining in popularity, with projected sales to cross the 1 billion mark by the end of 2013. (2)  However, the main difference between cigarettes and e-cigs is that e-cigs don’t contain tobacco, and that they utilize the process of vaporization for the user to absorb nicotine, as opposed to the combustion, or burning, of a regular cigarette. This is one of the central arguments of proponents of e-cigs – the fact that there is no actual burning involved in the process, and therefore, no smoke – firsthand, secondhand, or otherwise. Since the vast majority of the harmful chemicals in cigarettes are contained in the smoke itself (3), e-cig supporters tout this as a prime reason why e-cigs are “healthier” than their regular cigarette counterparts – in fact, a recent FDA study found nine contaminates in the tested e-cigarette, versus the 11,000 contained in a tobacco cigarette. (2) E-cig proponents also highlight the fact that e-cigs are safer than regular cigarettes due to the fact that there is nothing burning, which could theoretically reduce accidents such as smoking-related house fires (one of the major causes of house fires). (4) Thomas Glynn, the director of science and trends at the American Cancer Society, also stated that “…there were always risks when one inhaled anything other than fresh, clean air, but… there was a great likelihood that e-cigarettes would prove considerably less harmful than traditional smokes, at least in the short term.”  (2)

However, there is a huge amount of conflicting information and a variety of questions swirling around e-cigs and their use; are they actually safer than traditional cigarettes? How about exposure to secondhand vapor produced by their use? Are they safe for use in public places where smoking is traditionally banned, like restaurants or airplanes? Should they be classified as a cessation device (to help someone quit smoking, like nicotine gum, or the patch) or as a smoking alternative such as chewing tobacco? How should e-cig use be regulated? As e-cigarette use is still a fairly new phenomenon, there are comparatively few studies on the health risks involved, and like many questions regarding the use of e-cigs, the jury is still out.

However, e-cigarette use is a pressing matter for those of us in the life insurance industry, and especially for carrier actuaries and underwriters. How do you underwrite a potential client who uses these devices – do they qualify for a smoker rate, even though technically, they aren’t smoking? Due to the lack of conclusive studies on the matter, many insurance companies are currently erring on the side of caution and classifying e-cigarette users with tobacco-user status. This stems from the fact that the primary method used by insurance companies to detect tobacco use is via a urine test. These tests are designed to detect a byproduct of nicotine called cotinine, which is a metabolite of nicotine, or what nicotine breaks down to in the body. Due to the constraints of the current testing process, e-cigarette users are, for now, classified as tobacco users. There are few notable carrier exceptions at this time that currently classify e-cigarette users as non-smokers, which is the same category as those applicants who qualify for “alternate tobacco use” such as cigars use and smoking cessation methods (such as nicotine gum and the nicotine patch) as long as the applicant is using a non-nicotine e-cigarette.

Regardless of how individual insurance companies classify e-cigarette users, the reality of the situation requires financial professionals who engage in any kind of field underwriting to be aware of these devices, and to ask the appropriate questions of their clients.  Some relevant questions may be:

  • Do you currently use e-cigarettes? If so, are you still using regular tobacco products (and if not, when did you last use them)?
  • If you do currently use e-cigarettes, are they the nicotine or non-nicotine variety?
  • If you do currently use e-cigarettes, are you aware that you may be classified as a tobacco user for the purposes of life insurance underwriting?

The issue of e-cigarette use promises to be a hot-button issue for many of us in the months (and possibly years) to come, and life insurers are no exception; actuaries and underwriters are keeping a close eye on the topic as dedicated research is starting to be performed on the effects of e-cigarette users, and those around them. It’s refreshing to see that already some of us in the industry are keeping an open mind in regards to e-cigarette users, and we fully anticipate more positive changes to the way insurers will be underwriting e-cigarette users as more and more research is made available. However, for now it’s important to make our clients aware of the fact that if they are the typical e-cigarette user, they will most likely be classified as a tobacco user for the purposes of underwriting. As always, your Zenith Marketing Group Sales and Underwriting Teams are keeping a close eye on developments as well, and we look forward to assisting you with any questions you may have, on e-cigarettes or any other underwriting topic.

1 – http://en.wikipedia.org/wiki/Electronic_cigarette
2 – http://abcnews.go.com/Health/facts-cigarettes/story?id=20345463
3 – http://www.lung.org/stop-smoking/about-smoking/facts-figures/whats-in-a-cigarette.html
4 – http://www.nfpa.org/~/media/Files/Research/Fact%20sheets/smokingfactsheet.pdf


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