No smoking without fire

Socio-economic differentials in life expectancy have a long history in the United Kingdom. A large part of this over the last few decades has been stark differences in smoking rates — people of a high socio-economic status are much less likely to smoke, resulting in longer life expectancy.

However, people also tend to associate with those of a similar socio-economic group, so I know relatively few smokers.  As a result, I was unaware of some changes in smoking habits until I saw the joiner refitting our office sucking on his pen a lot.  It turned out not to be a pen, but an electronic cigarette. The joiner had been a forty-a-day man — sixty if the day ended in a night out — until he replaced his favourite brand with a similar-tasting nicotine-delivery system. The arguments in favour of switching to the e-cigarette were powerful: in addition to the considerable health benefits of not smoking, the savings were enormous; our joiner paid for his entire e-cigarette kit inside a fortnight from money not spent on ordinary cigarettes. Even for those smokers unmoved by the health benefits of stopping smoking, the e-cigarette has strong economic appeal in an era of austerity.

I then wondered how widespread e-cigarettes had become: according to a BBC article, one million people in Britain now use them. They would appear to have become a mainstream product: while typing this blog on my holiday return flight, the stewardess was promoting e-cigarettes along with perfumes and duty-free alcohol. Perhaps significantly, she was not promoting duty-free traditional cigarettes at all.

The rise of the e-cigarette will have implications for government revenues, as cigarettes are relatively heavily taxed.  However, it will also have consequences for the insurance industry: for example, is the user of an e-cigarette a smoker or a non-smoker in terms of life-assurance?  Apparently UK insurers consider users as smokers, possibly because of the likelihood of relapsing into smoking ordinary cigarettes. Another area of considerable interest to insurers is the potential effects on life expectancy, socio-economic differentials and mortality improvements. These impacts might be greatest for deferred annuities: if smokers in their forties were to switch to e-cigarettes en masse, this could have consequences for pricing bulk annuities. First of all, socio-economic differentials could narrow after decades of widening. Secondly — and relatedly — mortality-improvement rates for lower-status groups could be faster in the future than for higher-status groups.

There is perhaps some risk the other way — e-cigarettes make nicotine easier and cheaper to consume, and nicotine is a poison at a high enough dose (plants produce it as an insecticide, for example).  Worryingly, some commentators think the flavourings for e-cigarettes are designed to entice children to start using them. However, it looks possible that e-cigarettes might produce yet another boost to mortality-improvement rates.

 

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Stephen Richards
Stephen Richards is the Managing Director of Longevitas