A recently commissioned study by Hank George, Inc. surveyed 110 direct-writing U.S. and Canadian life insurance carriers on fully underwritten businesses. The survey covered a variety of tobacco, alcohol, and drug use topics*. ExamOne asked consultant and former risk management director at Allstate Financial, Eric Hjerpe, to outline and expand upon some of the findings and trends he extracted from the survey results.

Behind the smoke

The majority of respondents underwrite fully underwritten business based on tobacco/nicotine use. A compelling reason to continue with full underwriting is concern over anti-selection. In the absence of cotinine testing, will there be a spike in “smoker’s amnesia”? The survey discovered more insights into the industry’s view on cotinine testing.

  • The survey found nearly two-thirds of respondents estimate 5+% of their applicants do not disclose their tobacco use. Shockingly, more than one-third of respondents put tobacco misrepresentations at 9% or greater on fully underwritten business.
  • Nearly 25% of respondents now begin cotinine testing at age 16.

There has been much discussion among insurers in recent years about the appropriate cotinine-positive threshold. Does your company use the threshold recommended by the laboratory? Congratulations. So do four out of five of your competitors.

  • Slightly fewer than 20% of respondents feel heavy exposure to secondhand smoke can trigger a positive cotinine test. However, ExamOne research consistently shows that using the laboratory-recommended cotinine threshold of .30 all but eliminates the possibility of a false positive test result.
  • Ninety percent of insurers underwrite smokers who use electronic cigarettes in the same way they underwrite traditional cigarettes.

Will a predictive model used to identify potential tobacco users be sufficient to stem the tide of anti-selection? Will companies have sufficient processes in place to address potential false positive results? Will the increased mortality associated with false negative results erode profitability? These are questions that still need to be addressed.

Drinking and drugs

Turning to alcohol and drug use, the number of companies screening with the blood alcohol test is approaching one in five. This makes sense, given the questionable reliability of application drug and alcohol questionnaires used to identify drinking that may adversely affect mortality. Blood alcohol testing can help eliminate appeals. And the majority (just under 70%) of respondents report using CDT as a reflexive test.

Finally, the survey shows that fewer than 20% of companies routinely screen for marijuana with another 10% or so indicating this is something they are considering. ExamOne data shows there is a correlation between marijuana use and increased mortality. Clients may want to discuss these findings with ExamOne’s Laboratory Executive Vice President Betsy Sears or their Strategic Account Representative.

Industry concerns

There is much discussion in the industry today regarding simplified and accelerated underwriting programs. Can tobacco use anti-selection be fully mitigated by acquisition expense reduction and the use of data analytics? Does the recent inquiry by the state of New York Insurance Department regarding data analytics portend choppy waters for insurers? We don’t know. But this survey does show that anti-selection remains a significant concern for life insurers.

*Companies such as ExamOne which sponsored the survey, as well as companies completing the survey received the full survey report.


About the Author 

Eric Hjerpe Consulting offers practical solutions to enhance life insurance underwriting processing through cutting edge risk management tools. Eric has 25+ years of experience “reinventing” life underwriting and is also an experienced expert witness for matters related to underwriting and underwriting policy.

Eric was previously Director of Risk Management for Allstate Financial/Lincoln Benefit Life, responsible for setting underwriting policy, coordinating underwriting research and development, and managing vendor relations. Much of his effort the past 25 years has been devoted to re-engineering the underwriting process through enhanced utilization of laboratory testing and innovative underwriting processes.

During the month of April, the National Council on Alcoholism and Drug Dependence (NCADD) sponsors Alcohol Awareness Month to increase public awareness and understanding, and reduce the stigma associated with alcoholism that too often prevents individuals and families from seeking help.

alcohol abuse life insurance

Alcohol abuse, which can lead to alcoholism, is a pattern of drinking resulting in harm to one’s health, interpersonal relationships and ability to work. According to the National Institute on Alcohol Abuse and Alcoholism, alcoholism is the third leading preventable cause of death in the nation. An estimated 88,000 deaths are attributed to excessive alcohol consumption each year. Over time, those who use alcohol in excess are at increased risk of developing chronic diseases and conditions such as dementia, cardiomyopathy, and liver disease. The risk of developing cancer of the liver, mouth, throat, larynx and esophagus is also increased.

Alcohol and life insurance

An applicant’s alcohol use can affect their life insurance options. If indicated in standard self-reported data collection that they are a heavy drinker or have a history of alcohol abuse, life insurance underwriters can request additional information to help determine the applicant’s policy placement, such as:

Motor Vehicle Records (MVR) – An applicant’s driving history can be reviewed to discover if there are citations for drunk-driving arrests or reckless driving.

Attending Physician’s Statement (APS) – Health reports can unveil a number of alcohol abuse indicators. For example, a history of pancreatitis in a younger individual is highly indicative of heavy drinking.

Carbohydrate deficient transferrin (CDT) – CDT is a laboratory blood test that can be utilized to identify indicators of chronic alcohol abuse. CDT can be ordered by an insurance company in cases where there are indications of possible alcohol abuse.

Blood alcohol concentration (BAC) – BAC levels represent the concentration of alcohol in the blood expressed as a percentage. The BAC is an indicator of more recent alcohol use.

For more information about ExamOne’s MVRs, APS and laboratory testing solutions for underwriters, visit