Non-smokers could be footing the bill for smokers’ Life Insurance

• 4 in 10 smokers don’t admit their habit on Life Insurance forms
• Average smoker population among Life Insurance applicants 7% lower than general smoking population
• Percentage of Irish people who smoke falls by over 2% in two year period

As many as four out of ten smokers who have Life Insurance don’t admit it on their forms, new figures from AA Life Insurance suggest.

The AA analysis of Life Insurance applicants countrywide reveals that there are more smokers than there are people who admit to smoking on their Life Insurance policies.

According to data from the Health Service Executive (HSE), the overall prevalence of cigarette smoking in 2015 was 19.1 percent[1]. However that number is inconsistent with data which says that the average smoker population among Life Insurance applicants is only 12 percent.

“The real number of people who misrepresent their smoking habits on their Life Insurance policy is probably lower than the figure illustrated,” says AA Director of Consumer Affairs Conor Faughnan. “Smoking rates are highest among young adults and people in lower socioeconomic groups[2] – parties who are unlikely to have or need Life Insurance at that stage in their life.

“This could skew the figures slightly, but given the sizeable gap between actual smokers and those who admit they smoke in their policies it is hard to believe that there is not some misrepresentation going on,” adds Conor.

Life Insurance policies cost an average of 92 percent extra for smokers so as to offset additional healthcare and other related costs. However, when misrepresentation occurs non-smokers end up paying more than they should.

“When taking out a Life Insurance policy, applicants can be asked whether they had a cigarette over the last 12 months, which can be tempting to lie about if you consider yourself a “social” smoker. There’s a presumption that the impact on your policy will be next to nothing. But a “white lie” like that has a significant impact on a claim payment,” states Conor.

Vaping is not considered as smoking

Vaping, the increasingly popular aide to quitting cigarettes, is not considered as smoking for insurance purposes by AA Life Insurance. Once a person is tobacco-free for a full year AA Life Insurance will rate them as a non-smoker.

“If you non-disclose smoking and subsequently make a claim – regardless if it is related to smoking – an insurer can reduce the amount they pay, or decline it altogether. It really is not in a customer’s interests to non-disclose information as it truly has a negative impact on the outcome of the claim – at a time when the customer needs it most.”

Fortunately for non-smoking Life Insurance policy-holders cigarette smoking has been declining over the last few years. The percentage of Irish people who smoked was 19.1 percent in 2015, a drop from 21.5 percent in 2013[3].

Notes:

AA Life Insurance currently classify electronic cigarette users as non-smokers as long as they have not smoked tobacco in the previous 12 months.  However this approach is subject to ongoing review.

[1] http://www.hse.ie/eng/about/Who/TobaccoControl/Research/Q1_2015_Update.pdf, p1.

[2] http://www.hse.ie/eng/about/Who/TobaccoControl/Research/Q1_2015_Update.pdf, p3-4.

[3] http://www.hse.ie/eng/about/Who/TobaccoControl/Research/smokinginireland2014.pdf, p2.