Insurance faces a big fat problem
New risks are always emerging, with some having the potential to significantly change the way insurance is written. One emerging risk that has not been scrutinised by insurers is the widespread impact on insurance classes of rising obesity levels in Australian society.
The obesity epidemic has been widely researched in other countries, but in Australia only limited research on the issue has been attempted.
Munich Re Australasia CEO Heinrich Eder says the issue of obesity will affect more than just health and life insurance, and the effects may be seen sooner than insurers anticipate.
He told insuranceNEWS.com.au obesity now has to be taken into account in day-to-day underwriting.
“It affects so many parts of our life,” he told insuranceNEWS.com.au. “People are getting bigger, and this leads to more health issues, liability issues, workplace issues and workers’ compensation claims.”
Australian Bureau of Statistics data from last year shows more than 7 million Australian adults are overweight or obese – an increase of 2.8 million from 15 years ago. At the current rate of increase it’s estimated that 75% of Australians will be overweight or obese by 2020.
Obesity costs Australian taxpayers an estimated $1.5 billion every year in direct health costs.
But Mr Eder says obesity is not just a problem for the health insurance industry. He says obesity will affect society, the workplace, mobility and even our environment as spaces and products are modified to accommodate larger people.
This has all sorts of implications for general insurance.
“We don’t think about it as such a great issue and so it is often ignored,” he said. “We always say we have to lose weight, but actually we’re all gaining weight.”
A study by the Duke University Medical Centre in the US has found obese workers file twice the number of workers’ compensation claims and have seven times higher medical costs from those claims compared with non-obese workers.
And a report by the Australian Safety and Compensation Council (ASCC) warns obesity will increase the incidence of work-related injury and put greater strain on compensation schemes.
The ASCC says larger and physically unfit workers are more likely to have additional health risks, short-term disability, longer absence due to illness and higher health costs. They may also be more prone to accidents and non-fatal injuries.
The report says one study has found employees’ medical expenses increased from an average of $114 for people with normal weight to $573 for the overweight and $620 for the obese.
“It could therefore be reasonably expected that increases in accident numbers, claim durations and medical costs associated with obesity will place pressure on workers’ compensation schemes in the future,” the report said.
The ASCC says workplace and equipment standards will need to be updated to reflect Australian workers’ body dimensions – things like ladders, hoists, elevators, seats and forklifts, respirators, hard hats, safety glasses and gloves. Standards relating to working environments, such as working in confined spaces, will also need to be reassessed.
In February Victoria’s ambulance service bought four new heavy-duty ambulances for patients who weigh more than 159kg. The $1.4 million purchase was necessary because paramedics treated and transported 1450 extremely obese patients last year – a rise from one a day to five a day in the space of 12 months.
Hospitals are catering for obese patients with larger beds, toilets and CT scanners, and schools are ordering chairs one size up, while some airlines are even fitting their planes with wider seats.
Obesity also opens insurers up to liability exposure, according to the US Insurance Information Institute. It says legal cases against the food industry could leave insurers exposed to claims under general and product liability coverage.
While obesity is unlikely to be top of the insurers’ list of emerging risks, the problem deserves attention. It is likely to increase claims frequency and severity in health, disability and workers’ compensation coverage. Exposure to obesity-related tort actions may also affect liability insurance.
It’s just one more risk that the industry is going to have to tackle one day – and one more thing that industry professionals can think about before they go to sleep at night – preferably after a light meal and plenty of exercise.
The obesity epidemic has been widely researched in other countries, but in Australia only limited research on the issue has been attempted.
Munich Re Australasia CEO Heinrich Eder says the issue of obesity will affect more than just health and life insurance, and the effects may be seen sooner than insurers anticipate.
He told insuranceNEWS.com.au obesity now has to be taken into account in day-to-day underwriting.
“It affects so many parts of our life,” he told insuranceNEWS.com.au. “People are getting bigger, and this leads to more health issues, liability issues, workplace issues and workers’ compensation claims.”
Australian Bureau of Statistics data from last year shows more than 7 million Australian adults are overweight or obese – an increase of 2.8 million from 15 years ago. At the current rate of increase it’s estimated that 75% of Australians will be overweight or obese by 2020.
Obesity costs Australian taxpayers an estimated $1.5 billion every year in direct health costs.
But Mr Eder says obesity is not just a problem for the health insurance industry. He says obesity will affect society, the workplace, mobility and even our environment as spaces and products are modified to accommodate larger people.
This has all sorts of implications for general insurance.
“We don’t think about it as such a great issue and so it is often ignored,” he said. “We always say we have to lose weight, but actually we’re all gaining weight.”
A study by the Duke University Medical Centre in the US has found obese workers file twice the number of workers’ compensation claims and have seven times higher medical costs from those claims compared with non-obese workers.
And a report by the Australian Safety and Compensation Council (ASCC) warns obesity will increase the incidence of work-related injury and put greater strain on compensation schemes.
The ASCC says larger and physically unfit workers are more likely to have additional health risks, short-term disability, longer absence due to illness and higher health costs. They may also be more prone to accidents and non-fatal injuries.
The report says one study has found employees’ medical expenses increased from an average of $114 for people with normal weight to $573 for the overweight and $620 for the obese.
“It could therefore be reasonably expected that increases in accident numbers, claim durations and medical costs associated with obesity will place pressure on workers’ compensation schemes in the future,” the report said.
The ASCC says workplace and equipment standards will need to be updated to reflect Australian workers’ body dimensions – things like ladders, hoists, elevators, seats and forklifts, respirators, hard hats, safety glasses and gloves. Standards relating to working environments, such as working in confined spaces, will also need to be reassessed.
In February Victoria’s ambulance service bought four new heavy-duty ambulances for patients who weigh more than 159kg. The $1.4 million purchase was necessary because paramedics treated and transported 1450 extremely obese patients last year – a rise from one a day to five a day in the space of 12 months.
Hospitals are catering for obese patients with larger beds, toilets and CT scanners, and schools are ordering chairs one size up, while some airlines are even fitting their planes with wider seats.
Obesity also opens insurers up to liability exposure, according to the US Insurance Information Institute. It says legal cases against the food industry could leave insurers exposed to claims under general and product liability coverage.
While obesity is unlikely to be top of the insurers’ list of emerging risks, the problem deserves attention. It is likely to increase claims frequency and severity in health, disability and workers’ compensation coverage. Exposure to obesity-related tort actions may also affect liability insurance.
It’s just one more risk that the industry is going to have to tackle one day – and one more thing that industry professionals can think about before they go to sleep at night – preferably after a light meal and plenty of exercise.