The impact of medical and technological advances on health and property insurance are frequently discussed at length, but these advances also have great implications for other lines of business, and recently, life insurers have taken center stage in a variety of discussions about changing risks and insurability.

At the end of 2015, Prudential partnered with Aequalis, an independent organization that conducted extensive analysis on the feasibility of offering life products to the HIV positive community. The partnership allowed Prudential to offer 10- and 15-year convertible term life insurance products, making it the first major insurance to cover people living with HIV. Following that announcement, Manulife made the decision in April 2016 to offer term and permanent life insurance products to those living with HIV in both the US (underwritten by John Hancock) and Canada.

The decision to insure those living with HIV has been long considered by the industry. Prudential has been exploring the option since the beginning of the decade, but had little to go on without actual data on the statistical mortality of these prospective policyholders.  While longer lifespans and improved health of those living with HIV has been apparent for some time, it has taken a bit to implement a change in the insurability of individuals.

The challenge of insuring an unexplored risk has become apparent yet again, with the increasingly widespread legality of marijuana. Twenty states have legalized medical marijuana, four states have legalized the recreational use of the drug, and the size of the market for legal marijuana is projected to grow to $7.1 billion in 2016, with projections upwards of $22 billion by 2020. With all of the projected growth, implications for insurers continue to be an area with many questions left unanswered.

First, the fact that federal government still classifies the drug as illegal provides challenges for insurance companies as they work to understand what risk they are willing to absorb. At the same time, opportunities for insurers are extensive, as business owners that operates legal businesses associated with marijuana have different needs that must be met with commercial lines coverage.

But most recently, the legalization of marijuana and its impact on life insurance coverage has come to the forefront. Early this summer, Mutual of Omaha turned down an individual life insurance application for the CEO of Terra Tech based on his association with the marijuana industry. While the life insurance policy had nothing to do with Terra Tech, Derek Peterson’s association with a legal business as its CEO automatically made him a higher risk to insure individually.

With little data to go on, what occurs is similar to what Prudential saw five years ago when it began to explore insuring those living with HIV: a lack of quantifiable data on the risks associated with insuring this subset of the population. Legality is only one aspect of being associated with the marijuana industry. Similar to other lifestyles like skydiving or race car driving, even when legal, can be too risky to underwrite for certain insurance policies.

But also similar to the evolution of providing policies for those living with HIV, as more data is collected and analyzed, insurance companies may become more comfortable in offering some version of coverage for those associated with the marijuana industry. Those companies that are able to find creative solutions can showcase that they understand the unique needs of diverse individuals.

Stephanie Roy is the Director of Insights, Insurance at Mintel, focusing on all insurance sectors for Mintel Comperemedia. She is responsible for providing internal and external stakeholders with insights and analysis on trends in the Life, Health and P&C insurance industries.

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