The Great American Marketplace Essay

We’ve known for years that money is to be made from sickness.The cash flow from ill health generates revenues for drug companies,hospitals and medical insurers and provides incomes for all the men andwomen at work in the health-care industries. The prospects of profit in good health had seemed mostly confinedto the men and women who teach new tricks to old bodies and to those whosell the gear for fashionable exercising. But the grand and mysterious forces of the Great AmericanMarketplace have begun to make good health profitable for someinnovative insurance companies and economical for fit policyholders.Here’s how…

. The old actuarial tables put about 90 percent of us into the samepool when the companies evaluated risks, calculated costs and set rates.The skydivers, human cannonballs and fireworks packers were speciallytreated in high-risk pools. Their prospects of longevity werepredictably, statistically dim, so they paid higher premiums than therest of us. About 20 years ago, the more progressive companies began readingand believing what we were being told about smoking, so they begansorting their policyholders into pools of longer-lived, lower-risknonsmokers who paid lower premiums, and shorter-lived, higher-risksmokers who paid higher premiums.

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Typically, those of us who had neversmoked or who had quit were rewarded with premiums 5 to 15 percent lowerthan the smokers paid. More recently, the innovators in the industry have determined thatfitness is not a passing fad but a permanent condition for a large andgrowing group of Americans whose characteristics may be statisticallydefined and actuarially calculated. They are good insurance prospects.Their fitness keeps them healthy, so they stay at work and earn theincomes that pay the premiums without interruption. Their fitness givesthem longer lives, so relatively few die each year, and their premiumpayments continue over longer spans. So why not develop an insurance marketing strategy directedprecisely at the healthy, vigorous, physically fit Americans?–preciselywhat such companies as ITT Life Insurance Corporation of Minneapolishave done.

ITT, for example, created a new pool for the physically fitand offered them low premiums to swim in it, marketing-wise. ITT LifeInsurance says its premiums can be 50 percent lower than the norm forordinary, sedentary policyholders at other companies. To qualify for the fit-nonsmoker policies that ITT and others arenow offering, applicants must take a thorough physical examination andmeet physical and medical standards that confirm that the applicant hasbeen keeping to a regimen of vigorous physical exercise. ITT, forexample, requires a ratio of total cholesterol to high-densitylipoprotein cholesterol of less than 7 for men and 5.

5 for women. Theexaminations may also give close attention to blood pressure, heart andpulse rates before and after exercise and to the other measures offitness. In his speeches, Robert W.

McDonald, president of ITT Life, likesto say that too many insurance companies “are getting fat onAmerica’s longer lives. Many companies find themselves paying outless than they expected because, based on actuarial data 20 or 30 yearsago, there was no anticipation that life expectancy would increase asmuch as it has.” He says that the conventional companies have kept their fitpolicyholders in the standard pool that contains 90 percent of allAmericans–a pool that has been broadened to include more and moreAmericans who present serious risks. This practice has presented an opportunity for the agile companiesin a conservative industry–an opportunity to lure the bestpolicyholders from the less-agile companies.

This opportunity has alsobeen created by computers and the explosion of statistically reliableinformation we have been collecting about ourselves. In turn, the policies for physically fit nonsmokers (and, in someinstances, nondrinkers) creates a substantial financial inducement thatmay encourage still more Americans to take up healthful lifestyles. If you don’t smoke and you do exercise–and you have thephysique and the vital signs to prove it–ask your agent to give you aspecial low-premium policy for such physically fit lovers of life asyou. If he doesn’t, then maybe you ought to put yourself indifferent hands.

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