Drinking and the Implications for Life Insurance

//Drinking and the Implications for Life Insurance

Drinking and the Implications for Life Insurance

Drinking and the implications for insurance

The Facts

Over 90% of the adult population in developed countries drink alcohol. Over half of all Irish drinkers have a harmful pattern of drinking and we continue to rank among the highest consumers of alcohol in the EU.

Every seven hours, someone in Ireland dies from an alcohol-related illness and there are almost twice as many deaths due to alcohol as due to all other drugs combined. Alcoholic liver disease rates and deaths almost trebled between 1995 and 2007.

Alcohol-related disorders were the third most common reason for admission to Irish Psychiatric hospitals between 1996 and 2005. In 2006/2007 alcohol was a factor in 41% of all cases of deliberate self-harm and in one study of Irish people who died as a result of suicide, more than half had alcohol in their blood.

More than one in four of those attending accident and emergency departments have alcohol-related injuries and alcohol is a factor in a quarter of traumatic brain injuries.

Heavy drinking increases the risk of developing hepatitis, cirrhosis, some cancers, stomach disorders, pancreatitis, mental health problems, damage to nervous tissue, obesity, high blood pressure, heart problems and /or accident risk.

Definitions (source RGA – Global Reinsurer):

  • Heavy Drinking – more than 3 to 4 standard drinks (units) per day for men and 2 to 3 standard drinks (units) per day for women
  • Alcohol Abuse – a pattern of heavy alcohol intake with associated problems
  • Alcohol Dependence – a chronic disease of physical dependence which results in the inability to control drinking despite the consequences

The Insurance Perspective

The insurers’ objective is to identify applicants who have a higher risk of a claim and treat their application accordingly. For Underwriters, the big question is how much can a person drink before it affects their health? The answer is not straightforward and the risk selection process is complicated for the following reasons:

  • Lack of quality disclosure on insurance applications
  • The fact that some people are unaware that their drinking is harmful
  • Many who have harmful drinking patterns do not attend a health professional for treatment
  • Alcohol affects each individual differently

Underwriters categorise the applicants into the following groups:

  • Alcohol consumption within accepted safe guidelines;
  • Alcohol consumption in excess of safe guidelines but no evidence of alcohol dependence;
  • Alcohol dependence and past history of alcohol dependence;
  • Alcohol problems are not always disclosed at an application and because of this, the history is often discovered on a GP report obtained for another reason e.g. level of cover;
  • Once the risk is discovered a medical examination with liver function tests is usually requested, assuming acceptance terms look at all possible. However, given the trends, serious consideration should be given to the current risk selection process and how it accounts for this type of risk.


Underwriting has changed substantially over the past 10 to 15 years. The pressure to reduce costs, improve the customer experience and reduce underwriting cycle times among other things are driving this. It is rare that insurers would consider a single risk factor in isolation when developing underwriting processes or when setting prices, but rather the risks of the market as a whole are taken into account. That is not to say that what appears to be an increased risk factor should be ignored.

The introduction of a direct question into application forms regarding a history of alcohol problems has certainly improved disclosure and obviously strengthens the insurers’ position when it comes to non-disclosure.

Tele-interviewing/Tele-underwriting has been around for some time now and although not widely used in the Irish Market, it has been proven to elicit markedly better disclosure from applicants due to the confidential nature of the interview and the specialized question sets used by interviewers. If the long version or big ‘T’ as it is known is not to everyone’s taste, then a targeted or abridged version is available from most providers of the service and promises to be a very useful tool when assessing specific risks e.g. alcohol

Target GP reporting is a relatively new phenomenon in the Irish market. A targeted medical attendant report is an abridged version of the current PMAR which is used to aid the underwriter in risk assessment. Unlike a standard PMAR, it only requests details from the GP that are relevant to a specific risk, in this case, alcohol abuse or dependence. The specific nature of the report is expected to improve the quality of the information provided by the GP in terms of making the underwriting decision.

There is also a laboratory test available that helps detect heavy alcohol consumption (Carbohydrate-deficient transferrin or CDT) and this can be used in conjunction with liver function tests to aid in risk selection. The speed and relatively low-cost nature of the nurse medical service allow insurance companies to introduce more testing of this kind as standard.