Buy now, outlive your insurer’s projections and you may have “semaglutide” to thank and your insurer have it to curse!

The truth is that obesity is a killer and  weight-loss drugs like Ozempic and Wegovy have a magical aura. In many western countries obesity rates are heading towards the US tally of 40 per cent. So the benefits to societies as well as individuals of reducing or even eliminating that prevalence is obvious: a healthier, happier population that is more productive and less of a drain on public health systems. Financial gains — for drugmakers and health providers alike — could be vast.

But for every winner there is a loser, insurers are the potential losers. For one part of the financial system — life insurance companies and their clients — the magic spell of rapid weight loss via so-called semaglutide could prove a hex.

I mention “clients” as very few pension companies can avoid insurance against people living too long. While most individuals “self-insure” believing that they will take the risk that their money will run out before they do, pension schemes who promise to pay to your final day, will often buy insurance in case you don’t. Insurance against you living too long is likely to rise in cost and be passed on to “clients” – typically the pension trustees who in turn pass it on to those people sponsoring the scheme – historically the employer or groups of employers.

That is likely to change over the next few years as we start seeing superfunds or their close cousins Capital Backed pensions taking on responsibilities of sponsors. They too will have the insurance premiums to pay, or put their capital at risk. Re-insurers do the job- taking risk second hand from the pension schemes for a price that is likely to rise as we live longer.

The alternative is CDC where the risk is born mutually by those in the pool, or mutuality by defined benefit schemes big enough to avoid insurance and absorb increases. I had some interesting discussions about this at the Local Government Pension Scheme, one that is around five times bigger than the University Superannuation Scheme (it’s nearest rival) but still has the Government’s Actuarial Division asking questions about its enormously large membership.

CDC passes the risk of people dying on to the members , there is no backstop, as there is with the LGPS or USS, with CDC , which the Government is introducing legislation for, the pensions that can be paid are restricted by the payments in being fixed (the DC bit of CDC).

Everything that is good about reduced obesity — lower incidence of cardiovascular disease, cancer and diabetes, and a neutralisation of the more than 40 per cent higher risk of mortality — could rattle the status quo of life insurance and pensions in the first instance.

It could make CDC’s capacity to pay increasing pensions (to meet inflation calls) difficult. But what about those who don’t choose to go into a collective scheme but exercise pension freedom? For them the biggest risk of all- the risk of not having any protection from the downside of living too long- living too long without the means to meet the bills!

In reality, scary as the prospect of insuring against living too long is, it is better than late old age without the means to live properly.

Sympathy for the devil (aka insurers)?

One recent four-year study in patients with obesity and pre-existing cardiovascular conditions found the likelihood of death, heart attack or stroke was 20 per cent lower over a four-year period for people who take semaglutide versus a placebo.

It took decades for the last significant transformation of longevity — a sharp reduction in smoking rates — to take hold in many western societies (even if the Covid pandemic disrupted that long-term trend). Since the 1960s, life expectancy has increased 10-15 per cent to about 80 years in much of western Europe

Here a single drug innovation now promises to deliver a similarly dramatic improvement, but potentially over a period of months and years rather than the half-century that it took US smoking rates to fall from 42 per cent of adults to less than 12 per cent.

The FT tells us that the insurers are playing this down That tells me they are shit-scared.

So far, any impact on the insurance industry is largely theoretical. But the fast-growing numbers of people taking this kind of medication — 6 per cent of Americans at the last count, equivalent to nearly one in six obese people in the country — means that the topic is starting to crop up in company results calls with analysts.

UK insurer Legal & General was recently asked whether its assumptions about life expectancy would need to change as a result of weight-loss drugs. Finance director Jeff Davies said the group was “constantly monitoring” the issue, though he played down the likelihood that existing elderly clients with obesity would benefit materially from taking the medication. “The damage is done,” he said.

That isn’t quite as sad to insurers as it is to elderly obese!!!

I guess that if you are like me, getting on in life but not yet old, the state of your tummy is a matter of concern. I am going to have a word with my doctor (Dr Tommy of Neuman  City  practice) .Now what was that word?… Oh!- Ozempic or Wegovy.

£200 per month from Boots 

It’s a good time to invest in weight loss treatment. Ozempic sounds s a good way to increase the value of my pension!

I just need a way to exchange my pot for a guaranteed income that lasts as long as I do!