Could lifestyle underwriting help the protection industry to understand risks more accurately, asks Emily Perryman
The protection industry has known for some time that information about alcohol consumption, smoking and dangerous activities is crucial in understanding an individual’s risk of illness and death. But some insurers have suggested that this so-called “lifestyle underwriting” should be extended further to diet, exercise, postcode and driving behaviour.
On the face of it, this seems like a logical step. Numerous studies have shown that regular exercise boosts the immune system, helps prevent diseases such as heart disease, cardiovascular disease, Type 2 diabetes and obesity, and improves mental health. Similarly, healthy eating helps people to manage their weight, improve their overall feeling of wellbeing and reduce the risk of developing illness and serious disease.
Evidence also suggests that simply living in a particular postcode area could affect an individual’s life expectancy. A recent report by the World Health Organization (WHO) found that the average life expectancy of a boy living in Calton, Glasgow was 54 years – 28 years less than a boy in the nearby affluent Lenzie. Meanwhile, some insurers believe that if an individual has been convicted of dangerous driving in the past, this not only puts them at increased risk of death from a driving accident but also indicates they have a more risky lifestyle in general. If protection providers were able to underwrite these lifestyle factors, it would seem to follow that their understanding of the applicant’s risk would be considerably improved.
“There’s no doubt lifestyle is an important factor in our life expectancy and health,” says Andy Parkinson, technical claims manager at Friends Provident. “In the UK we generally accept that things like smoking, heavy drinking, obesity and recreational drug use influence health. Insurers ask applicants about these subjects. However, looking at things from a claims perspective, I do wonder if there’s a case for moving closer to the practice followed by some of our counterparts in the likes of the US and South Africa.”
Insurers in the US have asked applicants about their driving behaviour for some time, and there are signs that this could move over to the UK. In the direct to consumer market, Direct Line already asks individuals whether they have a fixed penalty driving conviction and whether they have been disqualified for driving under the influence of drink or drugs or for any other reason within the last five years. Some providers suggest that understanding these types of lifestyle factors are particularly useful for younger applicants, who do not tend to have much medical history.
“For a long time the protection industry has started off with getting a GP report, then maybe carrying out a medical or a screening,” says Mark Preston, underwriting and claims manager at AEGON Scottish Equitable. “But what is the significance of a GP report for younger people? I can see a move towards doing drug screenings and liver tests, although I don’t think there will be a wholesale shift away from medical underwriting.”