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The Toxic Truth: Tobacco Nondisclosure Has Doubled Since 2017

In recent years, nondisclosure of smoking and tobacco use has become increasingly problematic in the life insurance industry. It’s estimated to cost carriers over $4 billion per year. As smoking habits evolve and new tobacco products emerge, insurance underwriters face greater challenges in accurately assessing risk. A recent study done by Clinical Reference Laboratories sheds light on this trend, revealing alarming data about the prevalence of smoker misrepresentation.

Study Background
While CRL has been collecting urine for cotinine testing for decades, this study focuses on the 6.7 million samples collected from 2014-2021. This research was prompted by the evolving landscape of tobacco consumption, particularly the shift towards non-cigarette tobacco products like vaporizers and oral troches. At the same time, carriers have been cutting down on the frequency of fluid testing among applicants. Previous findings have already highlighted a concerning trend: an increasing number of applicants deny tobacco use yet test positive for cotinine in urine tests, indicating a rise in tobacco misrepresentation.

Here’s a closer look at the findings and how ForMotiv’s Nondisclosure Solution can help address these challenges.

Smoking Misrepresentation on the Rise

One of the key findings from the study focuses on the increase in smoker misrepresentation over time. Chart 3 shows the percentage of all applicants who deny tobacco use but later test positive. Using a threshold of 200 mg/dl to determine misrepresentation, the data revealed a sharp rise:

  • In 2015, just over 2% of all applicants fell into this category.
  • By 2021, this number had almost doubled, with nearly 4% of all applicants being classified as misrepresenting their tobacco use.

Why does this matter?
This trend is significant for the life insurance industry because it indicates that nearly 1 in 25 applicants are not accurately disclosing their tobacco habits. This discrepancy results in underpriced premiums and increased claims, ultimately impacting profitability. Given this rapid growth in nondisclosure, there is a need to identify and triage applications more effectively during the underwriting process.

A Doubling of Tobacco Non-disclosure by Smokers

Chart 4 from the study provides additional context by using all smokers as the denominator, answering the question: “Has the proportion of smokers who fail to disclose their habit changed over time?”

The data indicate a drastic increase in nondisclosure rates:

  • In 2017, around 23% of smokers did not disclose their tobacco use.
  • By 2021, this proportion had risen to almost 50%, more than doubling in just four years.

As carriers look to shift an increasing portion of their applicants to fluidless underwriting, knowing who to accelerate and who to intervene on is critical.

Potential Causes of the Trend
While the study doesn’t provide a scientific explanation for this increase, several factors may have contributed to this trend:

  1. COVID-19 Pandemic: The pandemic has influenced lifestyle changes, and smokers may be more reluctant to disclose their habits.
  2. Emergence of New Tobacco Products: The growing popularity of new tobacco products, such as vaping devices, may lead to confusion or purposeful nondisclosure.
  3. Reduction in Fluid Testing: The reduction of fluid testing due to pandemic restrictions may have reduced the “sentinel effect,” where applicants are more truthful if they expect laboratory verification.

Addressing the Challenge of Tobacco Nondisclosure Solutions

ForMotiv recognizes the growing challenge of tobacco nondisclosure, and nondisclosure more generally, in online life insurance applications. Our Nondisclosure Solution identifies applications likely to contain nondisclosure and misrepresentation and enables carriers to triage the application in real-time.

ForMotiv’s Nondisclosure Solution Benefits:

  • Behavioral Insights: Explore granular behavioral analysis on both customers and agents
  • Out-of-the-box Solution: ForMotiv alerts you of known high-risk behaviors on day 1 so you can begin taking action immediately.
  • Accelerate Confidently: Our solution helps carriers determine which applicants they can feel confident accelerating.
  • Reduce Nondisclosure: ForMotiv analyzes how applicants behave while answering important underwriting questions and flags those with a higher propensity for misrep and nondisclosure.
  • Drive Next-Best-Actions: We give carriers the ability to triage applications in real-time and drive the appropriate action for each individual applicant.

It’s worth noting that smoking/tobacco is just one area we’re looking at. We also monitor other important underwriting questions such as alcohol, weight, avocation, medical history, family history, and more to identify misrepresentation and nondisclosure.

In Summary
The data from the study highlights the need for life insurers to adapt their underwriting processes to address the growing problem of smoker nondisclosure. By leveraging our Nondisclosure Solution, insurers can better identify and manage risk, ensuring more accurate pricing and reducing unexpected claims.