As poor diets and rising obesity become more widespread, new weight-loss drugs like Ozempic and Wegovy are being seen as near-miraculous solutions. Obesity rates in many developed countries are climbing closer to America’s figure of 40%, and if these medications can help bring those numbers down, the social and economic rewards could be huge. A population with fewer weight-related illnesses would not only be healthier and more content, but also less reliant on overstretched healthcare systems and more capable of participating in the workforce. The potential financial returns, for both pharmaceutical companies and healthcare providers, are substantial.
But progress for one part of the economy often brings disruption to another. In this case, life insurers may be among those caught off guard. Rapid improvements in health outcomes for large numbers of people, thanks to drugs like semaglutide, could present an unexpected challenge to long-standing actuarial models and assumptions.
By helping people lose significant weight, these treatments reduce the likelihood of major health problems such as heart disease, diabetes, and certain cancers. They may also reduce the overall risk of early death, potentially by a significant margin. While these are undeniably positive developments for individuals, they could throw off the calculations life insurers use to determine how long their clients are likely to live and how much they’ll need to pay out over time.
If improvements in life expectancy happen slowly, insurers can adjust annuity pricing and policy structures over time. But if people start living noticeably longer not long after purchasing retirement products like annuities, insurers could find themselves on the hook for more payouts than expected. In such a case, the financial strain could fall directly on the insurers, cutting into their reserves and impacting profitability.
Right now, these impacts remain mostly theoretical. But with millions already using these treatments, roughly 6% of the US population, which translates to about one in six people living with obesity, the issue is beginning to draw attention in investor calls and company reports.
At a recent earnings presentation, UK-based insurer Legal & General was asked whether it may need to rethink its life expectancy forecasts in light of these new drugs. CFO Jeff Davies said the firm was keeping a close watch, but suggested the effect on existing older clients with obesity might be minimal. In his words: “The damage is done.”
Still, that may be too optimistic. Insurers have long baked incremental improvements in longevity into their models, typically around 1% to 1.5% per year, based on trends like healthier lifestyles and better medical care. But what if a medical breakthrough triggers a much faster shift?
Consulting firm Lane Clark & Peacock recently highlighted a study showing a 15% reduction in all-cause mortality risk over four years for obese patients taking semaglutide compared to a placebo. Another study, focused on people with cardiovascular issues, reported a 20% drop in the chances of dying, having a heart attack, or suffering a stroke.
If these kinds of benefits apply across large populations, the knock-on effects for pension and insurance businesses could be considerable.
To understand the scale of the potential change, it’s useful to consider historical precedent. The last major improvement in population health, the decline in smoking, took decades to unfold. Since the 1960s, adult smoking rates in the US have dropped from over 40% to under 12%, contributing to a 10–15% rise in life expectancy across much of the developed world. But this happened over the course of half a century.
Now, a single class of drugs might deliver a similarly transformative impact, but within a matter of years rather than decades.
There are still unknowns, of course. Long-term side effects of these medications aren’t fully understood. Some patients may stop using them due to cost or adverse reactions. And clinical trial results might not translate neatly to real-world use across entire populations. Nevertheless, many experts believe these treatments could have a profound effect on population health, perhaps even rivalling breakthroughs in cancer care in terms of impact on how long people live.
For healthcare payers and national health systems, the story is relatively straightforward. Upfront costs to provide these treatments might be steep, but long-term savings from avoiding chronic disease and expensive care could more than compensate. In other words, investing now could reduce the financial strain on healthcare systems down the line.
But the picture is different for life insurance and pension providers. If people begin to live significantly longer after buying retirement products based on old mortality assumptions, insurers could end up underpricing their obligations. This could expose them to large, unexpected liabilities, especially for policies already written.
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