Beware nicotine gum's effect on premiums, IFAs warn

According to advisers, both health insurance and life insurance premiums have been pushed up because of trace nicotine in a client's bloodwork, despite the client not having had a cigarette for years.

Wolverhampton-based Julian Pruggmayer, principal of Financial Risk Management, raised the alarm when one of his clients - who has not smoked a cigarette in five years - did not pass a life insurance nicotine test. 

Some insurers require Lints as part of a medical exam to underwrite the individual. On this occasion, the client was told their insurance cover would be more expensive to reflect the lower life expectancy relating to smoking-related diseases and conditions.

According to Pruggmayer, the client had not smoked in nearly five years and had not vaped, although he had, on very rare occasions, chewed nicotine gum. 

I think the public is being misled.Julian Pruggmayer

The tests are so sensitive they picked up the trace elements of nicotine from the chewing gum.

Pruggmayer, who also said his client lives a very healthy lifestyle and exercises regularly, said: "I think the public is being misled. The insurance industry prides itself on smoker and non-smoker rates.

"This chewing gum is purchased by people to help them give up smoking, only to then have their noses rubbed in it by this industry saying sorry gum is the same as lighting up 60 tabs a day."

Kevin Paterson, managing director of insurance broker Enduralife, said some insurers do try to price insurance based on a distinction between smoking and vaping, or price it based on how long ago someone gave up smoking, the majority still underwrite any nicotine presence as a risk.

He said: "The insurers we use typically operate in the same way and the rationale behind this is often driven by an ex-smokers propensity to smoke again if they are vaping or using a nicotine substitute, irrespective of how long they have effectively given up.

"Some insurers do make the distinction between smoking and vaping and will price accordingly, and some will also ask how long ago someone gave up smoking and will price that in accordingly."

Cost of smoking and effect on premiums

Their warnings coincided with Royal London's publication of a study which showed quitting smoking could save people up to £16,000 in insurance premiums over the course of their cover.

It said: "Smokers who kicked the habit could be eligible for lower rate premiums if they have not smoked tobacco or used any nicotine products in the last 12 months."

Table: Example of premium differences between smoker and non-smoker rates

Premiums are based on level single life cover, over a 25 year term for £150,000 sum assured. Source: Royal London.

Craig Paterson, chief underwriter for Royal London, said: "While the new year is a popular time for many to give up smoking, No Smoking Day is a perfect opportunity for those who didn’t quite manage to kick the habit.

"Committing to making a positive change to your health can also lead to a positive change to your wallet – and realising that may help people stick to their decisions. More importantly, stopping smoking can greatly reduce the likelihood of getting more serious illnesses."

When it comes to the cost of premiums, smokers usually pay around twice as much as their non-smoking counterparts, rising to nearly three times as much for older smokers. 

But while there is huge potential for savings on premiums - not to mention the money saved from not buying cigarettes - there are still potential risks for those who have trace nicotine in their system.

As Pruggmayer said, there ought to be more education around the effect that quitting aids such as nicotine gum could have on a person's medical records for insurance purposes.

Stopping smoking doesn’t automatically make them a standard risk that should be priced the same as everyone elseCraig Paterson

Paterson added: "The simple fact is that the effects of smoking may never leave the body and can always have some form of impact on health irrespective of when the smoker gave up.

"Don’t get me wrong the smoker will have a significantly better outcome if they stop smoking but it doesn’t automatically make them a standard risk that should be priced the same as everyone else.”

A spokesperson for Vitality said they would consider anyone who had not used nicotine products in the past year as a non-smoker: “When applying for life insurance, we ask people to declare their smoking status which includes the use of cigarette and nicotine replacement products.

"We do not currently differentiate between the use of any nicotine product.

“We do however, consider anyone who has not used any form of nicotine product within the past 12 months as a non-smoker, and will offer non-smoker rates as a result.”

LV told FTAdviser: "At application stage, smoker rates would apply to anyone who declares they’ve smoked, vaped, used e-cigarettes or other nicotine replacement products in the last year.

"For existing customers, if they stop smoking or using the nicotine replacement products for a period of 12 months, they can apply for non-smoker rates."

We do not currently differentiate between the use of any nicotine product.Vitality

Similarly, a spokesperson for Royal London said the insurer had a 12-month period in which quitters using nicotine replacement products would still be priced as if they were still smoking. 

The spokesperson said: "Any customer that uses a nicotine replacement product in the last 12 months will currently be given smoking rates.

"The product guidelines recommend using this for a 12-week period, but we appreciate customers can use these products out with these guidelines.

"We do offer lifestyle reviews if the customer has managed to stop using these nicotine replacement products for 12 months and we can then amend the terms to be on a non-smoker rate."

simoney.kyriakou@ft.com