Best's Review


Life Insurance
The Bitter Pill

Industry observers are seeing signs that claims from opioid deaths are rising, while shifts toward simplified underwriting and the middle market could increase exposure.
  • Jeff Roberts
  • February 2019
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Key Points

  • Claims Rising: Opioid claim costs rose slightly in 2017 for some, but not all group life carriers, according to a 2018 Munich Re survey.
  • Impacting the Workplace: Two-thirds of human resources professionals said their companies are impacted by opioid use today or will be in the future, according to a survey by The Hartford.
  • Assets Lost: Some financial advisers have reported clients draining financial protection and wealth management accounts to pay for rehab, legal costs and other expenses stemming from their own addiction or that of a loved one.


The stranger on the other end of the phone would tell her almost nothing.

Cheryl Canzanella just wanted to hear that her husband was all right. She wanted to hear something, anything, beyond what little the medical worker said: He was in the hospital, and she had to get there.

An addiction that began with a sore back and a prescription for an opioid painkiller had progressed into a “path of destruction” that consumed Colin Goodell's life, said Canzanella, a MassMutual brokerage director.

He lost his dream job just months after their 2011 wedding. Cash and possessions began disappearing from their Florida home. And then came the vicious cycle of rehab and relapse.

One final relapse, an accidental overdose involving fentanyl, would claim his life on that hot, August Monday in 2017. A drug habit that started with a gym injury ended with Goodell's death. He was just 38 years old.

“I don't look like someone affected by the opioid epidemic,” Canzanella said. “I want people to see that I'm an everyday person in a business suit, working a professional job. This can happen to anybody.

“What I share with people is it's not that difficult of a path to go from legally prescribed pain pills to illegal heroin out on the street. The face of this epidemic is not homeless people.”

They are clients and family members of clients, Canzanella tells her fellow advisers and life insurance colleagues at industry events and speaking engagements. They are people like her husband and surviving loved ones like herself, a woman who became a widow before her 40th birthday due to the opioid epidemic.

While the life insurance industry has been only marginally affected by the crisis compared to the general population or even the workers' compensation space, it is not immune. Group life and even some individual life insurers have witnessed a small increase in morbidity stemming from overdoses involving the highly addictive class of narcotics.

“The issue with the opioid crisis is that it impacts everyone,” said Swiss Re's Yommy Chiu, vice president, life and health R&D manager. “It's not just affluent people or lower socioeconomic people.

“Don't get me wrong: The magnitude is different with people in lower socioeconomic groups who don't have the financial means to get treatment. But what we've seen is there is no boundary to this. Men. Women. The rich. The poor. They're all touched by this crisis.”

Opioid claim costs rose slightly in 2017 for some, but not all group life carriers, according to a 2018 Munich Re survey. Almost two-thirds of life underwriters reported seeing an increase in the number of insurance applicants with a history of opioid use in the previous year, a 2017 survey by the reinsurer found.

And drug abuse death rates among the insured population generally increased—albeit slightly—from 2009 to 2014, according to Munich Re.

Many insurers have added opioid screening protocols and propensity models to bolster their risk assessments.

However, opioid-related deaths have barely impacted the fully underwritten, high net worth segments and have not warranted pricing changes, said Tim Morant, vice president and actuary, biometric research for Munich Re North America.

But for some insurers, that might be subtly changing as overdoses skyrocket due to fentanyl use.

“We are starting to see what I would call a signal,” Chiu said. “How big the trend can be ballooning out is the big, ultimate question.

“To be very technical, our findings are not statistically significant yet, but there is a strong signal, which tells me there's evidence that we're seeing increases of claims specifically for drug-related deaths.”

And many in the industry are concerned about higher exposure in the future as insurers seek greater penetration into the underserved middle market and make further investments in accelerated and simplified underwriting.

While simplified underwriting is faster and more accommodating to changing customer expectations, it eliminates precise paramedical exams and screening tests. In their place, data from medical records, credit histories and prescription drug and motor vehicle databases are used.

“The life industry is moving away from fully underwritten policies to simplified,” Chiu said. “They want to reduce and take away the traditional exam. The question is, if we take that away, what is our exposure risk to the people coming in and now purchasing life insurance?

“That has amplified the interest of many carriers. It's not simply the crisis itself. For the industry as a whole, it's how we're moving toward less traditional underwriting.”

The epidemic is impacting more than just morbidity. Some financial advisers and agents have reported a loss of assets as clients drain financial protection and wealth management accounts to pay for rehab, legal costs and other expenses stemming from their own addiction or that of a loved one.

Canzanella receives requests from other life insurers to educate their advisers on how to recognize the signs opioid addiction and help clients facing it.

“People are going right through their savings trying to save their loved ones,” said Canzanella, who is based in Jacksonville, Florida. “These are our clients. And we're losing assets over this.”

Cheryl Canzanella, MassMutual

People are going right through their savings trying to save their loved ones. These are our clients. And we’re losing assets over this.

Cheryl Canzanella

Workplace Threat

The faces stare back from obituaries and memorials, forever frozen in time.

They are the faces of the 70,237 people in the United States who died in 2017 of drug overdoses, smashing the record set only the previous year (63,632). More than 47,000 of them died from an opioid overdose.

The epidemic has swelled into a full-blown public health crisis, penetrating deep into American society. Death rates are increasing across many segments of the population and impacting all subsets, according to the 2018 Munich Re white paper, Opioids' impact on group life mortality.

That impact is also what makes it a threat at the workplace and to group life carriers.

Sixty-seven percent of human resources professionals said their companies are impacted by opioid use or will be in the future, according to a survey The Hartford released in November. It also found 65% see opioid addiction financially impacting their company today.

Those numbers mirror a 2017 survey by the National Safety Council, which reported prescription drug abuse affected 70% of employers, increasing absenteeism, accidents and overdoses.

Workplace overdose deaths have increased at least 25% annually since 2010. More than 215 workers died from an unintentional overdose while at work in 2016, a 32% jump from 2015, according to the Bureau of Labor Statistics.

“The impact on the group life space is different than the individual life space because some carriers might focus on more blue-collar groups versus white-collar groups,” Morant said. “So there could be a different socioeconomic impact for the group life space, and it could vary by carrier. This is consistent with the discussions we have had with our clients.”

It might be one reason nine out of 10 life underwriters were concerned about the potential impact of opioid addiction on mortality among the insured, according to a 2017 Munich Re survey.

Life insurers could find themselves facing greater exposure as they try to reach new customers in the underpenetrated middle market.

“It's been this elusive aim of the industry,” Morant said. “Companies have been trying to get to that market. Well, when entering into a different market, we would expect the experience with this epidemic to be different than what we have historically seen in the individual life space.”

Yommy Chiu, Swiss Re

There’s evidence that we’re seeing increases of claims specifically for drug-related deaths.

Yommy Chiu
Swiss Re

Taking Measures

After all, U.S. life expectancy fell in 2015 and 2017 and remained stagnant in 2016, following decades on the rise, according to the Centers for Disease Control and Prevention.

Largely attributed to the opioid epidemic, it is the longest period of general decline since 1915 through 1918, when World War I raged and a flu pandemic killed 675,000 Americans.

Drug overdose deaths have more than quadrupled since 1999, while opioid fatalities have risen sixfold.

Those staggering statistics explain why insurers have taken steps the past two years to protect their businesses and prevent opioid-related overdoses. The measures include opioids screening and predictive analytics using big data and artificial intelligence.

Insurance labs such as ExamOne introduced expanded screening protocols for both prescription and illicit opiates in 2017 to improve the risk selection process.

ExamOne's test can detect synthetic and semi-synthetic opioid use, including fentanyl, hydrocodone, hydromorphone, oxycodone and heroin.

“Several life insurers are considering or have been adding a screen for opioids into their requirements based on certain age, demographics or face amount guidelines,” said Dr. Gina Guzman, vice president and chief medical director, Munich Re U.S. (Life). “We don't recommend screening everybody because it's not clear that a broad screening program would bring great benefit at this time.”

She added that few applicants seeking to purchase fully underwritten individual life insurance have tested positive. That corresponds with Munich Re data that shows high face value clients who underwent fluid tests have been touched far less by the crisis than other population groups.

“It is definitely a concern because it's an upward trend,” Morant said. “But the contribution of claims from the opioid epidemic has been less than 3% of the claims and has been less than 1% in the large face amount market.

“The absolute claims level has been contained within pricing margins. A company who focused on simplified issue, guaranteed issue or final expense might have a different outcome than what we have seen.”

Some carriers have developed predictive analytics in their risk assessments, using machine learning to identify those with a higher propensity of addiction to mitigate the cost of screenings.

The data they're mining includes prescription drug databases, behavioral health claims, chronic disease history and even identifying those who smoke.

“We find that there's a very high correlation between higher opioid mortality and smoking status, with smokers having the higher opioid-related mortality,” Munich Re's Morant said. “So we have suggested that there's probably a benefit to screen people that are either verified smokers or those who through these propensity models have shown to be highly likely to be smokers.”

'A Signal'

The truth is no one knows exactly how many fatal opioid overdoses occur annually.

Multiple studies have found they are widely undercounted across the nation. Without an accurate number, public health officials and insurers have no way of knowing the full extent of the problem.

So many reinsurers and group life companies are studying their historic group claims looking for links to the epidemic.

The reasons for the undercount range from differing and inconsistent reporting and classification methods on death certificates, to the cost of toxicology screens and autopsies (which can reach $2,400 per decedent) to pressure from families who don't want “drug overdose” listed as the official cause of a loved one's death.

In fact, opioid-related overdoses are undercounted by 20% to 35%, according to a study published in February 2018 in the journal Addiction.

Chiu said life insurers may want to broaden their focus beyond overdose deaths to include accidental deaths.

“There is an increase in accidental deaths,” she said. “It would be interesting to look to discern that population of people who use opioids and who get into car accidents or other accidents and it's fatal. Right now that's not accounted for in terms of opioid-related mortality.”

More Than Morbidity

Canzanella's voice remained even, but subdued, as she shared her story.

She knows it can help others. And guiding advisers to recognize and help those who were in her situation is now “a calling.”

“They have clients who are experiencing this,” Canzanella said. “I get a lot of feedback that they're grateful to get a glimpse into what potentially may be happening with their clients.”

Families facing addiction can suffer financial strains that are almost as devastating as their emotional scars.

Advisers have witnessed clients liquidate retirement accounts and borrow from their life insurance to fund mounting treatment facility bills and legal costs such as lawyers' fees, bail and court fines.

In some cases, financial advisers have seen drug-addicted children move back home, dependent on their parents. And in others, older adults find themselves guardians of their grandchildren, whether due to their children's incarceration, a declaration finding them unfit as parents or fatal overdoses.

People will bankrupt themselves or drain their retirement savings to help a loved one, Canzanella said. One woman told her she spent more than $100,000 trying to help her son, who eventually passed away.

“That's the lengths at which people will go to save their kids,” Canzanella said. “We're not going to stop them from doing it. But I can share what the consequences are of taking that action.”

She advises helping clients avoid penalties and taxes from withdrawals, reallocating assets to make them liquid and updating legal language that prevents clients from excessive spending. She also suggests rewriting trusts and legacy plans to limit or withhold benefits if a son or daughter suffers from addiction.

And she advises parents to buy life insurance on their children for guaranteed insurability.

“I've been pretty surprised to see how many people are opening up to me once I've shared this story or they hear my presentation,” Canzanella said. “Then they say, 'Here's what's going on in my family.' … 'Here's what's going on with our clients.' … 'We just lost a client.'”

Despite the sharp increase in drug-related deaths in 2017, fatal overdoses in some areas have leveled in 2018. Maybe the epidemic is peaking.

But as the epidemic shifts, so does the life insurance industry.

The number of opioid deaths “is not uniform across life insurers,” Chiu said. “It is very dependent on the underwriting practice and the product, whether fully underwritten—something like universal life—versus simplified, such as final expense.

“And it's still going to be a continuing problem in the case of different types of products such as simplified issue.”


Genesis of a Crisis

The opioid epidemic was born out of the best intentions—and a healthy dose of greed.

A shift in the medical establishment's thinking about pain control in the 1990s launched an industrywide quest to effectively manage it.

Doctors began to liberally prescribe opioids, a class of highly addictive, semi-synthetic drugs that include prescription pain relievers such as oxycodone and hydrocodone. Pharmaceutical companies marketed them aggressively, claiming time-release versions such as OxyContin were safer and less prone to abuse.

By the early 2000s, the crisis had taken root.

“The first wave was this chronic pain treatment,” said Swiss Re's Yommy Chiu, vice president, life and health R&D manager.

People became hooked trying to alleviate chronic pain and even following seemingly innocuous incidents such as car accidents, gym injuries and dental procedures.

The pursuit of profits by the pharmaceutical and medical industries soon led to a burgeoning opioids economy. Some doctors grossly overprescribed, even to those without a legitimate medical need. The explosion of “pill mills” flooded communities throughout the nation with powerful, addictive narcotics.

The second wave began around 2012 when the epidemic became a visible threat, and regulatory action was taken.

Access to pills was curbed. Consequently, their street value skyrocketed. And drug manufacturers altered the medication itself through “abuse-deterrent” formulas, making it harder to crush and therefore snort or inject it, as well as limiting the high.

Some 11.5 million people misused prescription pain relievers in 2015 alone, according to a government study. When those addicted could no longer find or afford the pills, they turned to heroin.

“Many are surprised how many people are abusing,” said Cheryl Canzanella, a MassMutual brokerage director. Her husband, Colin Goodell, died of an opioids overdose in 2017.

“But like my husband, the minute they don't have access to it—your health insurance stops covering it or you're not able to afford it—things start falling apart.”

The third wave of the epidemic arrived about five years ago when deadly fentanyl-laced heroin took over the market. An avalanche of fatal overdoses followed due to its extreme potency.

“Fentanyl-laced heroin came in and really started to kill people,” Chiu said.

Fentanyl was a factor in 28,466 fatalities in 2017, rising from 19,413 a year earlier.

The Department of Health and Human Services declared the opioid crisis a national public health emergency in 2017.

By then, nearly a third of Americans had been prescribed opioid painkillers. And as many as one in five people given a 10-day supply can become long-term users, according to research.

Jeff Roberts is a senior associate editor. He can be reached at

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