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E-Cigarettes and Life Insurance in Canada

April 23, 2014

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Posted by: glenn

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Category: Life Insurance

I remember my first (and to date, only) experience with e-cigarettes.  I was at an internet conference in Dallas about 4 years ago and we were discussing the entrance of these devices into the online world.  One of my friends produced one and proceeded to take a puff.  He explained that it was just water vapour, and handed it to me.  As I raised it to my lips, I asked what it had instead of nicotine, and he responded that it HAD nicotine.

GAH!  I put it down immediately.  At the conclusion of the conference I was returning home to Canada and preparing to buy more life insurance – and if would’ve imbibed, I would have received smoker rates on that insurance application.  Thankfully for me, I didn’t actually partake.

Because that’s the net effect of e-cigarettes in Canada at this time.  If you use these – even one time in the last year, then you should expect to receive smoker rates on your life insurance application.  Life insurance companies in Canada offer smoker rates based on the presence of nicotine, not how you delivered the nicotine.  It could be smoking, it could be chewing tobacco, it could be e-cigarettes.

(Note, we have some novel ways to partially get around the smoker premiums, see our article on life insurance for smokers)

  • Cancer reduction:  Doctors are proclaiming that the health effects of these are much less than smoking a traditional cigarette.  They seem to be almost promoting it based on the ideas that ‘it’s not as bad as other alternatives’.  That’s fair enough for smokers, however the insurance industry doesn’t have enough data to draw the conclusion – and generally the insurance industry is slow to react.
  • Non-smoker rates:  In the U.S. some companies have actually offered lower than smoker rates to e-cigarette users.  Not so in Canada at this date – I know of no companies that would do that.
  • No market pressure:   This part I’m just speculating on, but I bet e-cigarette users are mostly younger folks not seeking life insurance.  Older folks buying insurance who don’t smoke likely aren’t taking up e-cigarettes.  With a limited to no market, there’s no pressure for insurance companies to get competitive on this.
  • Proxy for other mortality concerns:  While there are no mortality studies in the insurance industry on this, it’s likely that the insurance industry will use smoking rates as a proxy for increased mortality.  They do this already with marijuana use.  Marijuana users receive smoking rates, not because marijuana has the same carcinogenic effect as smoking tobacco, but because its use is correlated with other mortality factors.  Charging smoking premiums is just easier than explaining what those factors are.  It’s likely that e-cigarettes, even if there’s no carcinogens, may also be correlated with other mortality concerns.  Perhaps e-cigarette users are more likely to smoke traditional cigarettes later?  If so, it would make sense for the life insurance companies to charge smoker rates today.

Maybe the life insurance companies in Canada will update their policy, but I don’t think it will be anytime soon.  Expect e-cigarette users to get smoker rates for the forseeable future.

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