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Life Health > Life Insurance

The Sound of Death

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A few years ago, I watched a documentary on the Cherynobl disaster, and in it was film footage taken by helicopter of the ruined plant. As the camera passed over the top of the reactor, you could see its glowing core within. Somewhere off frame, there was the furious clicking of a Geiger counter, and the camera man, who at that time knew he had already received a lethal dose of radiation, narrated, “what you are hearing is the sound of death.” He died shortly after shooting that footage.

Unless you have been marooned on a distant planet, you have heard by now of the Japanese earthquake that ravaged the country last week, and that caused extraordinary tsunamis. Combined, the damage has already put this disaster on pace to exceed Hurricane Katrina as the most costly natural disaster in history.

By last Friday, however, early reports were surfacing that there were troubles with a few of Japan’s nuclear power plants that were in the quake zone. While some news agencies and even President Obama were bust denying that anything was wrong, something was, in fact, terribly wrong. As the weekend unfolded, and reactors experienced more and more problems, including fires, explosions, leasks and the ongoing threat of nuclear meltdown, the problem got to the point where it could not be denied any further, and now the world watches as Japan and her allies try to contain the problem as best they can. Last night, a new fire broke out at one station; today is a new day. Perhaps a new threat will emerge at any one of the compromised stations. We will have to wait and see.

In the meantime, there is already a significant health risk underway, and one that could translate into serious repercussions for portions of the health insurance industry. Aaron Datesman – a personal friend of mine – recently wrote this damning article on the serious problems he is seeing in how radiation risk in Japan is being reported. Now, Aaron is easily the smartest person I have ever met. He scored nearly perfect SATs. He turned down Harvard. He was, for a while, an honest-to-goodness rocket scientist. He currently works for the Department of Energy, and is deeply opposed to nuclear power. Like myself, he lived less than 100 miles from the Three Mile Island power plant back when it went sideways in 1979. Between that and growing up near Bethlehem Steel – which for most of the Cold War had multiple Soviet ICBMs targeted specifically at it – a childhood in the Lehigh Valley provided a strong education in the risks of radiation, and Aaron and I aren’t the only ones who left that area thinking that nuclear power is one of those genies better left in the bottle. Aaron’s politics are well to the left, but don’t let that turn you off. The man knows his science.

I bring all of this up because if Aaron is right, and I strongly suspect that he may be, the health risk in Japan thanks to radiation exposure could very well lead to the kind of long-tail health crisis not seen in that country since the end of World War II. Why does this matter to the life and health industry? Well, for one, Japan is an extremely well insured society, with high levels of life insurance and universal health coverage. The cancer rates for rural Pennsylvania spiked after Three Mile Island. I simply do not wish to extrapolate something similar to include our friends in Japan. The acute risk does not seem to be that bad, really. As my senior editor Allison Bell puts it,

Japan has about 130 million people, and about 1 million die every year. If, say, half have substantial amounts of life insurance (from private insurers, as opposed to the postal life company), then, say, 500,000 insured people die there every year. So, the disasters/nuclear plant would probably have to kill at least 100,000 people to affect claims all that much, and it could be that some kind of radiological event exclusion would let life insurers avoid paying any of the Fukushima-related claims, if they had any trouble doing so.

Excellent points. My concern, really, is that radiation exposure could lead to long-tail health risk, such as cancer, that might scotch life underwriting. At what point does a book of life business begin to tank when large numbers of people start to die 5, 10 or 15 years ahead of schedule? What happens to Japanese life insurance were the country’s overall cancer rate – the bestin the world, by the way – to change for the worse? Given that Aflac has already fired Gilbert Gottfried over an off-color joke he made about the tsunami on Twitter earlier this week, we can assume that it and companies like it have much at stake in the Japanese market. The risk of radiation may very well be nothing more than a near-miss in the long run. And like so many other fast-breaking news stories, these early analytical concerns may be overblown. I’m always willing to concede that. But from a risk management perspective, the situation in Japan merits very close scrutiny for all parties involved, and that includes the health and life insurance world. Even those companies that have no market share in Japan may very well be affected by those that do, should a significant life reinsurance situation arise. If one does, then it will mean that there are problems to contend with in Japan that make the initial damage of the quake and tsunami pale in comparison. Let us hope that never comes to pass.


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