Life insurers continue examining policies around marijuana use

The various legal ups and downs around marijuana use that arose over the past few years have impacted a number of major industries. As policymakers work to figure out the best way to implement decriminalization versus partial or full legalization of the plant, companies have to react quickly to ensure they can seize as much of the developing opportunities as they can.

This remains true of many types of businesses, whose operations may vary on a state-by-state basis because while some have fully legalized the sale and consumption of cannabis and related products, others continue to abide by federal law, which still classifies it as an illicit narcotic. As such, life insurers may need to do more to develop clear policies around how they will deal with marijuana use, and willing to refine those policies regularly as new laws or information comes to the forefront.

Medical matters
Prior to this wave of partial or full legalization – which has come to the forefront of many legislative efforts across the country in recent years – companies may have opted to simply charge regular marijuana users the smoker's rate, which is typically at least twice that of non-smokers. That may not be a winning approach anymore. For one thing, a majority of the nation's states have now at least decriminalized use of the drug, and of that number, most of them have legalized it for medical reasons. 

Strategies around medical marijuana use may vary from recreational issues.

As such, life insurance companies may need to reconsider their approach at least in this realm, as more are starting to view use of medical marijuana like they would any other medication. Life insurance applicants prescribed marijuana by a doctor for a chronic medical issue will typically not be charged the smoker's rate for marijuana use, but their premiums would be higher depending upon the severity of that specific medical issue.

On the other hand, those who are prescribed cannabis for issues like insomnia, anxiety and so on likely wouldn't carry the same risk – at least, depending upon the frequency with which they use it, or the amount they consume. Basing decisions on medical grounds – on a case-by-case basis – is becoming more common.

What about recreational use?
Fewer states across the U.S. have taken the approach of legalizing recreational marijuana use, which of course does not stop people nationwide from engaging in that activity. In these cases, companies would likely not be advised to change their policies from one state to the next, regardless of legality, though they may not treat it the same way as nicotine use.

However, as with the issues surrounding medical use, the frequency and volume of recreational marijuana use may come into play more often these days, rather than remaining a binary “yes/no” issue as it was years ago. Frequent, high-volume users would, for example, likely face higher rates than those who use it infrequently or only in small quantities.

Most companies will include a urine test in the medical examination portion of the application process which obviously would turn up whether a person has used marijuana somewhat recently. Those who say they do not use cannabis on their applications but later test positive for it may find their policies declined or, later, canceled. Typically, companies will not deny an application on the basis of marijuana use unless it's something an applicant tried to hide in the first place.

This standard may be the right one going forward, as disparate laws regarding possession and use of the plant continue to roll out nationwide.

Getting it right
With tens of millions of Americans using marijuana in some capacity every month, a growing number of life insurers are taking the long view and underwriting policies for even frequent marijuana users, instead of denying them sight unseen as they would have in the past. Of course, these decisions are not being made in a vacuum, and risk profiles are compiled from many different inputs; if an applicant's marijuana use is accompanied by other, more dangerous behavior, that would be a bigger warning sign than someone who uses cannabis to relax before bed.

Of course, it makes sense for companies to avoid putting any hard and fast policies into place for a long time to come, especially as medical studies around marijuana continue to proliferate. The more data that comes to the fore, the better informed insurers will be when it comes to crafting their own strategies for underwriting around the plant going forward, and – potentially – finding better ways to connect with consumers on policies at price points that make sense for all involved.

With these considerations in mind, it's vital for life insurance issuers to make sure applicants understand the ways their use of medical or recreational marijuana will impact their rates, or why that may be the case. The clearer a company is about what it's charging and why its making certain underwriting decisions, the more likely people will be to remain satisfied with their coverage on an ongoing basis. This can improve client relations for potentially decades to come.