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Tips, trends, and best practices shared by our team of life insurance underwriters and technologists

The Impact of Marijuana on Life Insurance

impact of marijuana

While the decriminalization/legalization of marijuana has been a popular topic in the news, it has also been blazing a considerable amount of attention in the insurance industry.  Although the opinions of individuals, as well as guidelines by insurance providers may vary, it’s irrefutable that we are in the midst of a significant shift towards developing policies and products to accommodate these changes.

Why is the legalization of marijuana an important topic for life underwriters?

With the shift, will come changes in underwriting guidelines, which makes this a prominent subject for life underwriters to stay on top of. They will have to learn new guidelines and shift their mindsets. Below I’ve identified key headlines in the news from this past year.

The history behind the decriminalization  of marijuana 

The decriminalization of marijuana has a long history that dates back to 1968 in Portugal when a political revolution took place that sparked a chaotic transition from authoritarianism to democracy. Amid the discordant perspectives of their new political freedom and economic direction, Portugal became vulnerable to what they had been sheltered from for many years:  widespread drug use.

As Portugal opened up their borders, making travel more accessible, they experienced a rapid influx of an assortment of hard drugs into the country. The government initially took a conservative approach with harsh punishments throughout the 1980’s and 1990’s.  By 1999, almost 1% of the population was addicted to heroin, and the use of cannabis was considered a criminal offence that was punishable by up to three months’ imprisonment.

In 2001, as an anti-drug program, Portugal was determined to decriminalize the use and possession of drugs by implementing Law 30/2000.  This law allows an individual to legally purchase and possess up to 1 g of heroin, 1 g of MDMA, 2 g of cocaine, 25 g of marijuana, or 5 g of hash. These amounts are enough to last approximately 10 days.

Portugal's decriminalization of marijuana

If you fast-forward to recent times, the decriminalization of drug use in Portugal has been widely accepted as successful and used as an example for other countries pursuing more liberal and less stringent drug legislations. According to the results published in the 2014 European Drug Report, drug addiction in Portugal has drastically decreased. Furthermore, HIV and AIDS related deaths among people who use drugs has significantly dropped as well.

The impact of legalizing marijuana on insurance

Not long ago, a number of Canadian insurance providers announced plans to commence underwriting recreational and medical marijuana users as non-smokers.  Some are taking a broad approach in that they will rate anyone who consumes marijuana but does not smoke tobacco as a non-smoker. This was reflected in recent statements made by one of the providers, “clients who use marijuana will no longer be considered smokers, unless they use tobacco, e-cigarettes or nicotine products.”

Furthermore, their decision to make this adjustment was supported by the findings from scientific studies on the health impacts of marijuana. As per a released statement,

“In our industry, we keep up to date with medical studies and companies update their underwriting guidelines accordingly...as a result, people who use marijuana are now assessed at non-smoker rates, unless they also use tobacco.” - Hynek Financial Group

Motivating factors for changes in insurance

The decision to make these changes was likely motivated by several factors.  Lowering consumer’s premiums is one, given the tremendous discrepancy in rates.  For example, if a $500,000, 20-Year Term policy costs non-smokers about $53 a month, smokers could be paying up to $148 a month.  Another potential reason for implementing these changes is the competitive market among insurance providers. As insurance companies continue to change guidelines for marijuana, others will likely follow suit to remain competitive.

Marijuana being recognized as an alternative therapy

As marijuana use is gradually being recognized in the health industry as an alternative therapy, the stigma associated with its use is slowly burning away. This of course has been a sustained and prolonged development based on numerous scientific and clinical research studies.  In one survey published by the New England Journal of Medicine, 1,446 doctors from 72 different countries and 56 states and provinces in North America were asked for their opinions on the use of medicinal marijuana. The results indicated that 76% of all votes were in favor of its use.  Their focus was often impelled by our responsibility as caregivers to alleviate suffering.

Canada’s largest pharmacy chain to provide coverage for medical marijuana in employees benefit plan

Recently, Canada’s largest pharmacy chain expressed its hopes for getting the green light to sell medical marijuana.  Furthermore, Loblaw Companies Limited and Shoppers Drug Mart announced that it will be covering medical marijuana under the employee benefit plan for up to a maximum of $1,500 per year.  The insurance claims provider for this coverage stated that only prescriptions to treat spasticity and neuropathic pain associated with multiple sclerosis, as well as symptoms associated with chemotherapy for cancer patients would be considered.  In a current Forum Research poll, 61% of Canadians are in favor of the pharmacy selling medicinal marijuana.

As the federal government rolls out a plan to legalize marijuana by July 2018, it is most certain that insurance providers will be reviewing their policies and underwriting guidelines to best accommodate these changes.  With further scientific and clinical research into the benefits of medicinal marijuana, the stigma often associated with the herb may eventually be extinguished, even if it ignites a buzz of controversy along the way.

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Written by: Garen Markarian

Garen is a Senior Underwriter at RGAX. He supports the RGAX Underwriting Solution Services team in providing comprehensive life insurance underwriting solutions to help carriers optimize risk management outcomes and better compete now and into the future. In addition to more than a decade of industry experience, Garen has an undergraduate degree in Neuroscience from The University of Toronto, and a post-grad diploma as a CRA from The Michener Institute.