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Russell Wangersky: Place your bets, please

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It’s really just like any other kind of gambling, you know.

You pay your money to the insurance company, and take your chances.

The insurance company, of course is hoping that you’ll stay alive and they’ll get to keep your premiums and years of interest.

Now, insurance companies already do everything they can to limit their risks: I recently started a new term life insurance policy, after the premium on the old one doubled in a single year.

So I got an identical new term policy — from the exact same insurance company. (I asked why the old policy had doubled: the answer? The insurance company was calculating that, if I was simply rolling over the policy instead of getting a new policy, I must be afraid I wouldn’t pass the medical requirements. That meant I was essentially admitting I was a bigger risk.)

The new policy meant pages upon pages of probing questions: how much did I drink, did I have any one of a legion of medical conditions, did I use any drugs — prescription or otherwise — who was my doctor, and could they see his files.

A very professional nurse came to the office to weigh and measure me, to take samples of my urine and vials of my blood. I signed papers, and signed more papers.

You can’t blame the insurance company: it just wants to know what it’s getting into — to see if I’m the kind of risk they want to take.

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Now think about what American insurer John Hancock has just announced: from now on, it will only write insurance policies for clients who are willing to have their health and activity tracked — primarily through wearable devices or smart phones, but also through the frequency of their medical appointments and other markers.

The company already offered benefits to healthy users through its Vitality program — now, everyone new customer for a John Hancock policy will have to be a Vitality client.

Here’s CNBC on the change: “According to Vitality, its worldwide policyholders live 13 years to 21 years longer than the rest of the insured population and have 30 per cent lower hospitalization costs.”

But that’s a bit of a chicken and egg issue, isn’t it? Do people live healthier and longer lives because they are in a program that tracks their health, or is it only people who live healthy lifestyles already who want to sign up for that kind of program by choice?

You can dress it up as wanting to make your clients healthier and more active, but the bare bones are that you probably want clients who are healthier and keep paying their premiums for longer without making claims.

The problem, of course, is that if one insurance company leaches all of the healthier people out of the pool, the rates for the people who aren’t in the healthy pool necessarily have to go up, to cover the increased average cost. (You can bet other insurers will also jump on this bandwagon.)

But don’t make the mistake of confusing it with altruism.

It’s a bit like a casino: the house sets the odds they’re willing to accept. And the house always wins. John Hancock wants healthier clients so it can pay out less, and avoid risk.

By the way, I passed the tests for my new policy and even got a bit of a discount as a result. Still, I’m not sure how confident my insurer actually is about my future: just this week, weeks after my old, more expensive policy expired, they offered me a “grace period” to send in a premium payment and keep that policy going.

Only one hitch: in order to accept their offer, they pointed out that I “must be alive” when they receive and cash the cheque.

Russell Wangersky’s column appears in 36 SaltWire newspapers and websites in Atlantic Canada. He can be reached at — Twitter: @wangersky.

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