Pamela Hellig considers whether vaccination against COVID-19 and other diseases should be a rating factor for life insurance.
Cast your mind back to 2019. It wasn’t that long ago, but it feels like a different time: Brexit, not COVID-19, dominated conversation, the idea of running a year-end valuation remotely was laughable, and the word ‘Corona’ conjured up images of beach parties and hangovers.
For most, it was unthinkable that a microscopic pathogen would soon topple the world economy and separate us from our loved ones. We were living in a world not dominated by infectious disease, a privilege granted by one of the most effective medical interventions of all time: the vaccine. Then 2020 happened.
Last year the world waited with bated breath for a COVID-19 vaccine as we witnessed the devastation wrought by a global pandemic. While the importance of vaccination has always been understood – as evidenced by extensive childhood immunisation programmes around the world – COVID-19 shone a spotlight on the effects of no vaccination and under-vaccination.
The pandemic has also highlighted that, even in the world’ most individualist societies, we are dependent on other people’s behaviour and decisions. Vaccination, like other preventative measures, such as mask-wearing and social distancing, relies on large-scale community take-up to be effective – so it becomes a social issue, even where vaccination is not mandatory by law. When someone chooses not to get vaccinated, they affect not only themselves, but also their families, employers, vulnerable individuals, the economy and the community at large.
We don’t expect sky-diving smokers to pay the same life insurance premiums as non-smokers who do not participate in extreme sports.
This does not seem fair, and while we know that life is not fair, is there not something that we as actuaries can do about it? Surely underwritten insurance exists to make life a little bit fairer? We don’t expect sky-diving smokers to pay the same life insurance premiums as non-smokers who do not participate in extreme sports, so why should those who choose to get vaccinated subsidise the increased mortality and morbidity expenses of those who choose not to?
An old idea
This idea of premium discrimination based on vaccination history is not new. In 1899, when smallpox was rampant across the globe, the British Medical Journal published an article entitled ‘Life Insurance and Vaccination’ that set out the results of an inquiry into the practice of life insurers regarding proposals for the insurance of unvaccinated lives. The authors recognised that: “If vaccination is to be grossly neglected […], the price in the shape of smallpox attacks and […] deaths will have to be paid, and life insurance societies […] will suffer in proportion to the want of vaccination and revaccination in their membership, whilst the vaccinated members will have to pay the money penalties involved in diminution of funds and bonuses.”
In other words, the mortality impact of the public not getting vaccinated would be material enough to affect insurers’ claims experience and, consequently, future benefit payments. The 69 respondents to the inquiry were grouped into eight classes based on their underwriting treatment of unvaccinated lives, with the most popular responses being to load premiums, exclude smallpox-related deaths from cover and decline the applicant altogether.
More than 120 years later, are there any obvious significant practical or ethical barriers to reintroducing vaccination history as a rating factor in life insurance underwriting? According to my research, no. Besides the billions of pounds spent globally by the insurance industry on claims related to vaccine-preventable illness and death each year, do we not have the influence, and perhaps the duty, to encourage positive behaviour within our markets? Considering that insurance companies have already started loading for COVID-19 for high-risk applicants, would it not make sense that those who get themselves vaccinated (against COVID-19 and other diseases) should enjoy premium discounts to reflect their lower underwriting risk?
The public – especially the generation that will rebuild the post-COVID-19 world – is very conscious of the ethical and social responsibilities of large corporations. Perhaps that presents an opportunity for actuaries to overhaul our underwriting processes, rediscover the principles of fair premium pricing, and think about the part we have to play in preserving the lives and livelihoods of the public we serve.
Based on the paper The ethical and practical considerations of using vaccination history as a rating factor in life insurance underwriting, presented by Pamela Hellig at the Actuarial Society of South Africa’s 2020 Virtual Convention 6–8 October 2020.
Article originally published by The Actuary, March 2021. © The Institute and Faculty of Actuaries
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