According to the World Bank, in 2013, the average South African has a life expectancy of 56.74 years. This is an increase of almost five years since 2005.
However, we are also getting more obese. Approximately 61% of South Africans are overweight or obese, making us the most obese country in sub-Saharan Africa.
Considering some of the conditions associated with obesity – which includes type 2 diabetes, coronary heart disease, some types of cancer as well as stroke and depression – there is reason for concern.
Direct proportions
While it is important to remember that mortality is directly proportionate to the level of obesity³, many of the health risks associated with obesity can be managed, thanks to medical advances. Further, there is a need for the industry to factor in the long-term burden of some of the conditions associated with obesity.
Traditional approaches
The industry commonly relies on the body mass index (BMI) to determine whether an individual is obese. According to the world health organisation, a BMI of more than 30 qualifies as obese. Most insurers classify obese clients into large bands. This results in the same loading being applied to all clients in that band.
There is a consequence of this approach. If – for example – there is a mortality loading increase from 50% (between a BMI band of 33 to 37) to 100% (between a BMI band of 38 to 43), a client with a marginally higher BMI (38 as opposed to 37), will have to pay for the huge discrepancy between the premiums of different bands.
Another concern with this approach is that it may discriminate against healthy clients who happen to have higher BMIs. Certain clients do have higher muscle mass and not fat; this contributes to their overall weight.
The fair approach to underwriting high BMI forward-thinking cover providers follow a more reasonable approach by smoothing out the drastic jumps in loading values between the traditional bands. In this instance, a 45-year-old client with a BMI of 37.7 would get a 50% extra-mortality loading on his cover, if the client would sign up for a more forward-thinking product that smooths out the stepped approach to BMI, this could even result in an overall premium increase of less than 30%.
The insurer will also remove the mortality loading in full if the client is otherwise healthy⁴. This will ensure that more active clients with higher BMIs which are caused by high muscle mass are treated fairly.
Managing the expectations
While obesity is a sensitive matter to discuss with clients, managing their expectations from the start will reduce the possibility of any awkwardness or conflict at a later stage.
Start by ensuring that they sign up for needs-matched cover with a fairer underwriting approach and BMI categorisation. It is also important to ascertain if your clients have any chronic conditions which are caused by obesity. Advisers then need to explain why and how loadings might be applied.
It is also important to explain to your clients that there are market players that will review this after a six to twelve-month period after achieving the healthier weight level.
Frank conversations
By having frank and transparent conversations from the start and by selecting a product that does not discriminate or leave them short-changed, the financial adviser, can make a positive difference in your clients’ lives. All clients deserve to be treated fairly; heavier clients should be no exception.
¹ South African obesity rate on the rise. Published by 702 on 24 July 2017. Available at http://www.702.co.za/articles/26564/south-african-obesity-rate-on-the-rise
² Overview: Obesity. Published by the UK NHS. Available at https://vww.nhs.uk/conditions/obesity/
³ Obesity: The challenges for life insurance. Published by cover magazine UK on 15 June 2015. Available at https://www.covermagazine.co.uk/cover/feature/2412335/obesity-the-challenges-for-life-insurance
⁴ With indicators such as their cholesterol levels, blood sugar, blood pressure and waist circumference within normal ranges.
- Schalk Malan is the CEO of BrightRock.
- This article was first published on 01 October 2018 by FA News (page 52).