New obesity treatments seem to promise longer and healthier lives. Good news, obviously, but a possible problem, it appears, to life insurers.

One of the more persistent arguments of nanny-staters over the past half century or so has been that the state has the right, particularly in countries where taxpayers are footing health-care bills, to intervene to control, directly or indirectly, adults’ lifestyle choices, most notably, perhaps, in the case of cigarette smoking. It was an argument that rested, certainly in some countries, on somewhat shaky grounds, because of the amount raised by taxes on cigarettes, but it was an argument that found an audience.

There was something else too, but mentioning it was often declared to be in poor taste by, ironically, the same neo-prohibitionists who had raised the financial argument in the first place (who were, in reality, much more interested in controlling behavior than anything else, but that’s a topic for another time). This something else was that while smoking increased someone’s chances of illness (and thus the need for health care) it was also highly likely to reduce his or her life expectancy, and thus the demands that they would eventually put on public and private pension providers and, in many cases, health-care systems by living longer.

Fast forward to the arrival of Ozempic and its semaglutide cousins as a treatment for obesity (and, it seems, quite a bit more, including certain addictive behaviors). They promise longer and healthier lives. Good news, obviously, but a possible problem, it appears to life insurers.

Patrick Jenkins, writing in the Financial Times:

Some actuaries are starting to worry [worry!] that the health upside for individuals could be so extreme that it upends insurers’ overall predictions about how long people will live — and thus how much money they will need to distribute to their clients before they die.

It’s apparently an issue that’s beginning to be raised by stock analysts when meeting the managements of life insurers. To date, the underlying assumption has been that life expectancy will improve by up to 1.5 percent a year.

But what if we start doing better than that?

The Financial Times:

One recent four-year study in patients with obesity and pre-existing cardiovascular conditions found the likelihood of death, heart attack or stroke was 20 per cent lower over a four-year period for people who take semaglutide versus a placebo.

Jenkins points out that the last great jump in longevity (by about 10-15 percent to 80 or so) was significantly helped by sharp falls in the smoking rate, a process that took place over decades. But what if the next jump is sudden, the result of the mass adoption of semaglutide-based treatments? There are some indications that this may already be happening in the U.S, with obesity recently declining for college graduates and (so far) plateauing for everyone else.

According to another report in the Financial Times, this one by John Burn-Murdoch, one in eight Americans have tried these drugs, with 6 percent as current users. This appears to be the best explanation for the shift in obesity trends.

Burn-Murdoch:

The US leading the descent is a beautiful twist. Its unparalleled consumer culture sent its obesity rate rising faster and further than almost anywhere else. When the solution was regulation or moderation, America was at a disadvantage. But when procuring and distributing large quantities of pharmaceuticals is the name of the game, the US is unrivalled. These drugs are more widely available there than anywhere else.

America! Capitalism!

Patrick Jenkins:

For health insurers (and indeed public health systems), longer-term reductions in chronic disease treatment could more than offset a big jump in upfront treatment costs. But the opposite seems likely to apply to life and pension companies. For their boards and regulators — as well as the reinsurance companies to which they may lay off their longevity risk — staying sanguine may not be an option for much longer.

And, by extension, this is an issue that is going to be of relevance (in good ways and bad) in assessing the longer-term viability of Medicare, Medicaid, and Social Security.

Note

Updated to reflect the fact that life expectantcy has been increasing by up to 1.5 percent a year rather than 1.5-2 percent.