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 and
women at work in the health-care industries.

The prospects of profit in good health had seemed mostly confined
to the men and women who teach new tricks to old bodies and to those who
sell the gear for fashionable exercising.

But the grand and mysterious forces of the Great American
Marketplace have begun to make good health profitable for some
innovative insurance companies and economical for fit policyholders.
Here’s how….

The old actuarial tables put about 90 percent of us into the same
pool when the companies evaluated risks, calculated costs and set rates.
The skydivers, human cannonballs and fireworks packers were specially
treated in high-risk pools. Their prospects of longevity were
predictably, statistically dim, so they paid higher premiums than the
rest of us.

About 20 years ago, the more progressive companies began reading
and believing what we were being told about smoking, so they began
sorting their policyholders into pools of longer-lived, lower-risk
nonsmokers who paid lower premiums, and shorter-lived, higher-risk
smokers who paid higher premiums. Typically, those of us who had never
smoked or who had quit were rewarded with premiums 5 to 15 percent lower
than the smokers paid.

More recently, the innovators in the industry have determined that
fitness is not a passing fad but a permanent condition for a large and
growing group of Americans whose characteristics may be statistically
defined and actuarially calculated. They are good insurance prospects.
Their fitness keeps them healthy, so they stay at work and earn the
incomes that pay the premiums without interruption. Their fitness gives
them longer lives, so relatively few die each year, and their premium
payments continue over longer spans.

So why not develop an insurance marketing strategy directed
precisely at the healthy, vigorous, physically fit Americans?–precisely
what such companies as ITT Life Insurance Corporation of Minneapolis
have done. ITT, for example, created a new pool for the physically fit
and offered them low premiums to swim in it, marketing-wise. ITT Life
Insurance says its premiums can be 50 percent lower than the norm for
ordinary, sedentary policyholders at other companies.

To qualify for the fit-nonsmoker policies that ITT and others are
now offering, applicants must take a thorough physical examination and
meet physical and medical standards that confirm that the applicant has
been keeping to a regimen of vigorous physical exercise. ITT, for
example, requires a ratio of total cholesterol to high-density
lipoprotein cholesterol of less than 7 for men and 5.5 for women. The
examinations may also give close attention to blood pressure, heart and
pulse rates before and after exercise and to the other measures of

In his speeches, Robert W. McDonald, president of ITT Life, likes
to say that too many insurance companies “are getting fat on
America’s longer lives. Many companies find themselves paying out
less than they expected because, based on actuarial data 20 or 30 years
ago, there was no anticipation that life expectancy would increase as
much as it has.”

He says that the conventional companies have kept their fit
policyholders in the standard pool that contains 90 percent of all
Americans–a pool that has been broadened to include more and more
Americans who present serious risks.

This practice has presented an opportunity for the agile companies
in a conservative industry–an opportunity to lure the best
policyholders from the less-agile companies. This opportunity has also
been created by computers and the explosion of statistically reliable
information we have been collecting about ourselves.

In turn, the policies for physically fit nonsmokers (and, in some
instances, nondrinkers) creates a substantial financial inducement that
may encourage still more Americans to take up healthful lifestyles.

If you don’t smoke and you do exercise–and you have the
physique and the vital signs to prove it–ask your agent to give you a
special low-premium policy for such physically fit lovers of life as
you. If he doesn’t, then maybe you ought to put yourself in
different hands.


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