Insurers find wider waistlines are leading to shrinking profits

Expanding waistlines are about to eat into life assurance companies' profits, as obesity catches up with smoking as the leading cause of preventable death, according to a survey by reinsurer Swiss Re published last week.

High-fat foods and a lack of physical exercise mean the number of overweight people in developed countries has risen by 300 per cent over the past 30 years, raising the risk of an early death and swelling the cost of tackling diseases related to obesity.

Obesity is associated with heart diseases, diabetes and some types of cancers, and is linked to premature death.

The study said that an obese 40-year-old, even if he did not smoke, could die six to eight years earlier than otherwise expected.

Higher mortality would hurt insurers' profits from existing life policies where they can no longer increase premiums or adjust terms.

"Obesity presents the greatest threat to \ business, where margins are tightly squeezed due to competitive factors and insurers are unable to raise rates," the study said.

For new policies, growing obesity was less likely to be a problem if the risk could be assessed and rates set accordingly, it said.

The findings suggest that future applicants for life assurance may face more stringent medical examinations, including screening for the risk that they may later become obese.

According to Mr John Geraghty, managing director of online insurance intermediary LABrokers.ie, an overweight person may well find that they pay more in premiums for life assurance than a person of the same age and sex who is of normal weight.

"Younger people would be loaded higher because, as they get older, their weight puts more pressure on their cardiovascular system. The potential for a claim increases as they progress through the life of the policy," Mr Geraghty said.

"Therefore, insurance companies take account of a person's height, weight and also the age," he said.

The tables used by the companies measure a person's body mass index - the scientific method of judging whether a person is underweight, overweight or within a healthy range.

Overweight males and overweight females will be given the same loading by most companies, said Mr Geraghty.

A loading is where the insurance company increases the premium to compensate for the increased risk the person is bringing to the insurer.

For example, a person aged 35 who is five feet, five inches tall and weighs 16 stone could expect to receive a loading of 50 per cent, according to Mr Geraghty.

So if the life assurance quote was €500 a year, they would have to pay around €750 a year.

If the person weighed 18 stone the loading would be 100 per cent, and if he or she weighed 19 stone, they would have to pay an extra 125 per cent.

The insurer will "more than likely" request the applicant to undergo a medical examination to assess the individual case before it applies such a loading.