There is an ongoing debate on health impact of e-cigarette smoking on individuals, with increasing number of people taking to it. However, the understanding and public perception of its health impacts continues to be unclear and inconsistent.
What are e-cigarettes?
Electronic cigarettes or e-cigarettes, are battery-powered devices that heat a liquid solution, which typically contains nicotine, into a vapour that is inhaled — or “vaped” — by the user. In contrast to the traditional cigarettes, there is no burning involved in e-cigarettes and hence no smoke i.e. e-cigarette allows users to inhale the addictive nicotine without burning any tobacco.
The first e-cigarette was developed in China in 2003 and introduced in Europe and US just over a decade ago. The current consensus that e-cigarettes are generally safer has led to rapid increase in its popularity, however its long term consequences are yet unknown.
Number of e-cigarettes users increases from 4 million to 20 million in 5 years
Number of e-cigarettes users globally has dramatically increased over the last five years from 4 million in 2013 to over 20 million in 2018. Experts predict this may even overtake traditional cigarette smoking in future, barring any restrictive regulations.
Despite growing numbers, e-cigarettes market is much unregulated hence it is difficult to have a common theoretical base globally. In some countries, such as Austria, e-cigarettes are categorised as medical devices and their sales are restricted. Currently, at least 16 countries, including Singapore, Thailand and Brazil, have imposed a complete ban on e-cigarettes. Many others only permit non-nicotine based versions and ban any sale promotion or advertising of e-cigarettes.
On the other hand, in the US and the UK, the use and sale of e-cigarettes to adults are legal, placing these two countries as leading consumers of e-cigarettes. Even in these markets, there is no standard approach to risk assessment across the insurance industry yet.
There are three kinds of e-cigarette users: Dual Users, Experimenters, and Former Smokers.
Majority of e-cigarette users are dual users. Dual-users continue to use traditional tobacco cigarettes, along with e-cigarettes for convenience. These users may also be easing their way into e-cigarettes in an attempt to quit smoking traditional cigarettes.
Experimenters could be the most critical category of e-cigarette smokers. With the perception of e-cigarettes smoking being less harmful, increasing numbers are joining this category. They are also more likely to try traditional cigarettes, which could lead to an increased prevalence in cigarette use. Because the liquid used in e-cigarettes can contain flavours that are appealing to teenagers, there are concerns that young people could become experimenters, leading to increased nicotine addiction in minors.
The opposing views
E-cigarettes are commonly being used as a smoking cessation device, especially since the liquid used in the devices can contain varying amounts of nicotine.
According to a recent UK study, it is estimated that 470,000 people are using them as an aid to stop smoking and tens of thousands are successfully quitting smoking each year as a result.
While World Health Organization (WHO) maintains there is insufficient evidence that e-cigarettes will reduce the prevalence of traditional cigarettes and urges countries to consider regulating and prohibiting e-cigarettes, researchers have found that e-cigarettes contain harmful chemicals and toxins. The unregulated e-cigarette manufacturing markets, with almost 8,000 different flavours and compositions available, act as a gateway to nicotine addiction and other drugs.
E-cigarettes and Insurance
Smoking is the single greatest “preventable” cause of illness and premature death.
The sooner one quits smoking, the higher the increase to life years. Someone giving up smoking at the age of 25-34 can eventually have a mortality close to the level of a “never smoker”.
Quitting Smoking and life expectancy
Thus, the invention of e-cigarettes and their popularity over the years is as a “stop smoking” device could be a boon, as a change in tobacco consumption presents a significant opportunity to reduce insurance claims from smokers.
This will impact both the incidence rates on protection products and severity of claims under medical reimbursement products, making it an important issue for insurance industry to take note and address in its underwriting, pricing and reserving.
Current insurance practice and challenges
Only a few countries, like the UK, have started collecting data on e-cigarette users through proposal forms / underwriting questions. According to a recent market survey by Institute and Faculty of Actuaries (IFoA), which included 19 life insurance companies, 80% of companies ask a specific question to identify e-cigarette smokers.
However, they are still far from categorising it as a separate rating category. Overall, 84% of insurance companies treat e-cigarette smokers the same as traditional smokers and 16% as non-smokers for rating purposes.
The concerns from underwriting perspective are:
- Unknown long term health impacts
- Gateway for non-smokers towards smoking
- Relapse back to smoking if using e-cigarettes as a cession device
Additionally, there are no medical tests available that could make the distinction.
- Currently, cotinine test cannot distinguish between conventional or e-cigarette smoker. It would show a positive for either.
- Alternatively, Anabasine (urine) or Caboxyheamoglobin (blood) can confirm no tobacco use, not distinguishing between an e-cigarette smoker and a non-smoker
That means we are back to relying on policyholder disclosure.
With the advanced medical research and increasing penetration of vapers, new tests are being devised, so market experts and medical doctors can expect underwriting practices to start changing in the next 3 years or so.
Then the question is, what is the relative risk of e-cigarette usage and what these people should be charged?
From an actuarial perspective, this means ultimately trying to assess the impact of e-cigarettes on mortality / morbidity / longevity in an insurance context. The biggest challenge is the data. There are no long term studies and all the inference drawn today is based on medical research. The long term health impacts can only be seen over the next 20 – 30 years.
For mortality, multistate modelling is being explored in the UK. This involves categorising policyholders in various states: never smoked, traditional smoker, ex-smoker, and e-cigarette smoker and estimating transition intensities between these states and their eventual mortality risk / transition into dead state.
Apart from not having long term studies, this is especially challenging due to the risk of people switching back and forth between traditional and e-cigarettes or becoming dual smokers. Hence, the interstate movements can get complex and so is their relative mortality risk.
Statistics state that less than 10% managed to quit despite over 80% of smokers who are trying to. Thus, majority will have complex transitions models even if they carry lower relative risk.
Additionally, impact of changes in legislation and public policy will be key determinants of take up rates, quit rates and relative riskiness of e-cigarettes.
There is still uncertainty
General consensus is that e-cigarettes are much safer because they do not produce tar and carbon monoxide (“it’s the nicotine that leads to addiction but the tar that kills”). However, there is limited data to either support or challenge the “95% safer” claim, although this view is widely perpetuated and has become pseudo fact. This will be challenged in due course as the data and models are developed. Regulatory changes will play a key part in how the related risks evolve.