How to insure clients who use marijuana

It is possible to secure preferred best non-smoker rates for medicinal smokers and standard non-smoker rates for recreational users

From an underwriting perspective, it’s easy to see why smoking marijuana makes insurers nervous. From an underwriting perspective, it’s easy to see why smoking marijuana makes insurers nervous.

As marijuana use becomes legal in more states, producers and clients want to know: “What does this mean for me?” For some clients, it means greater access to affordable life insurance coverage. For producers, it means learning how to evaluate a client’s marijuana use by type and frequency, then pairing that client with the right carrier.

Preferred best non-smoker rates are out there — I’ve personally gotten them — but only if you convince your client that 100 percent honesty is the best way to proceed. Not only do HIPAA laws protect any disclosures they make, but the simple act of telling the truth ensures there will be no “surprise” findings based on the medical exam, which will save money, time and hassle for all involved.

Marijuana legislation: medicine or mistake?

As of this writing, 20 states and the District of Columbia allow the use of medical marijuana. Fifteen additional states have pending legislation to legalize prescription-only marijuana use. In 2012, Colorado and Washington became the first states to legalize its use for recreational purposes. An additional two states — Mississippi and Nebraska — are on the books for failed medical marijuana legislation. Regardless of our own views on the subject, it’s clear that society’s view of marijuana use is changing. It remains the most common illicit drug in the country, according to the U.S. government’s DrugFacts website, and remains classified as a Schedule I substance, with a high risk for abuse and no medicinal value.

If it seems strange that a drug prescribed for pain and nausea is classified as having no medicinal value, well, it is. To earn FDA approval, a drug must have consistent and measurable effects that remain consistent from use to use. So far, this hasn’t been possible with marijuana, since the plant contains hundreds of chemicals that can trigger slightly different effects in users — and that’s not taking into account the different varieties and hybrid strains available for use.

However, a synthetic version of THC was approved to treat nausea in cancer patients as long ago as 1985, in the drug called Dronabinol. A drug that contains chemicals taken directly from the marijuana plant was approved for public use in the UK in 2010, with approvals following in Spain, Canada, Germany and several other countries. The drug, called Sativex, is currently in Phase 3 clinical development in the U.S.

Given the state of confusion over marijuana’s status as an “illicit drug” as well as a prescription medication, can clients who admit to smoking marijuana get insured?

Absolutely.

Underwriting marijuana smokers

I’ve secured preferred best non-smoker rates for medicinal marijuana smokers, and standard non-smoker rates for recreational marijuana smokers. I’ve also seen preferred best non-smoker rates available for infrequent recreational use. You can get these rates, too, as long as you understand how the carriers define marijuana use. 

Carriers still view the use of marijuana as illegal. Though it may be permitted in certain states, whether for recreation or medicine, it’s still illegal on the federal level. That being said, when it comes to underwriting, carriers typically disregard the question of legality and view the practice as a habit similar to tobacco use.

From an underwriting perspective, it’s easy to see why smoking marijuana makes insurers nervous. Smoke, whether from tobacco or marijuana, can cause harmful physical effects including lung irritation, persistent cough, phlegm and an increased chance of lung infections. Ever since the U.S. Surgeon General’s first report on smoking and health in 1964, carriers have charged smokers more than non-smokers. As a general rule, insurers assume all forms of smoking are harmful unless scientifically proven otherwise. However, even the government’s DrugAbuse.gov site admits it is unclear whether smoking marijuana contributes to lung cancer. That’s why there is a gray area in terms of how carriers treat marijuana users.

Nic West, Brokerage Director for Pinney Insurance Center, predicts industry-wide change on the issue. “With marijuana use becoming more common in both recreational and medicinal situations as well as various states approving that usage,” he says, “it’s only logical to assume that the life insurance industry will follow suit and relax their underwriting guidelines.”

Frequency is the key when it comes to assigning rates to a recreational marijuana smoker. For example, one carrier provides standard non-smoker rates based on infrequent use defined as twice a month, while another defines infrequency as smoking twice a week. The more carriers you work with, the more options you have for insuring these clients.

“As the use of marijuana becomes more ‘mainstream’ and less taboo across the country,” says Liran Hirschkorn of BestLifeQuote.com, “life insurance agents have an opportunity to win new clients by understanding various insurance company guidelines and getting clients approved at better rates, where some carriers might decline altogether. Understand your client’s specific habits, and match them with the right carrier for a competitive advantage.”

This advice also applies to a prospect who uses medicinal marijuana. In addition to the use of cannabis, underwriting will also be looking at the underlying health use the drug is being used to treat. The impairment becomes the primary focus and the use of marijuana is the additional concern. Depending on the impairment, that client could be offered a higher rate than a purely recreational smoker.

Honesty is the best policy

This brings us to the second challenge with insuring clients who use marijuana. Your client is likely to be nervous about making a full declaration of their habit. It’s your job to reassure them that honesty is not only necessary, but it’s in their best interest financially.

A client’s first concern may be the legal ramifications — even if marijuana use is legal in their state. Tell them not to worry — they’re protected by HIPAA laws, which strictly forbid the sharing of information gathered during the medical underwriting process. This includes authorities, spouses and employers.

I worked with one client who didn’t even want a spouse to know about their marijuana use. I helped another client secure coverage for a key man policy, paid for by his employer. He didn’t want his company knowing about his marijuana use. It wasn’t a problem because every client is protected by HIPAA laws. The sooner you put a prospect’s mind at ease, the sooner you can get them covered.

A client’s second concern is probably avoiding the higher rates assigned to typical tobacco users. Interestingly, some carriers are distinguishing between marijuana that’s ingested versus inhaled. Since carcinogenic effects may be reduced when ingested, your client may be able to secure non-smoker rates. However, a marijuana smoker who attempts to hide his or her use — whether for fear of disqualification or public judgment of his character — needs to know that the medical exam drug screening will likely come back positive for cannabis. THC metabolites, which indicate marijuana use, can show up in a urine sample four to six weeks after use.

If a client fails to disclose their marijuana use and the medical exam comes back positive, it doesn’t mean an automatic decline. It does mean they can be less favorably underwritten. (And if they are declined, it’s probably not based solely on marijuana use.) To avoid prolonging the underwriting process or risking material misrepresentation, help your client understand how important it is that the results of their medical exam match their medical and public records. Honesty really is the best policy.

In practice: medicinal vs. recreational usage

Now let’s take a look at two case studies to illustrate the difference between insuring clients with medicinal vs. recreational marijuana use.

Subject No. 1 uses marijuana medicinally to treat mild anxiety and insomnia. In this case, because the condition is minor and the use is medicinal, we secured a preferred best, non-smoker rating.

Subject No. 2 smokes marijuana twice a month on a recreational basis. We wrote a cover letter to the under-writer explaining the usage and how it relates to his high-paying and stressful job. We got him qualified as a standard non-smoker by scheduling the exam three weeks out and ensuring the client tested negative at the time of the medical exam. He did have two other offers, though, both of which qualified him at smoker rates that were double what we obtained for him.

Based on these case studies, what’s the overall effect of new marijuana legislation on life insurance? The legislation and regulation itself has little to no effect at all. The issue at hand is the increased prevalence of use. For this concern, it all comes down to which life insurance company you use.

You can qualify prospects for coverage whether they smoke marijuana medicinally or recreationally. Find out why they use it, how they use it, and how often they use it. Then use that knowledge to place them with a carrier proven to offer favorable rates for their specific circumstance. Staying on top of current events in the industry, like this one, will earn you more business and a reputation for forward thinking. 

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