MADISON, N.J. (Legal Newsline) - Researchers with Assured Research said a "third wave" of asbestos litigation due to lung cancer could threaten insurers who are relying on outdated actuarial models.
In a report titled "A Third Wave in Asbestos Liabilities Lies Ahead," released this month by the New Jersey-based company, researchers claim insurers will be swamped by "unexpected" reserve charges because they are relying on outdated statistics.
William Wilt, president of Assured Research and co-author of the report, said insurers aren't prepared for what is to come with lung cancer cases because actuarial models are "systematically biased." The number of mesothelioma cases isn't declining and lung cancer cases are adding to the crowded system.
"In studying asbestos-related claims, we're seeing evidence of outdated actuarial models. Since they're based on 30-year-old epidemiological and demographic data, they can't accurately forecast asbestos-related claims. Some insurers also seem to be ignoring advances in medical knowledge and diagnosis - and the changing behaviors or consumers and personal injury lawyers," Wilt said.
"Insurers' reserves are for the more traditionally occupational exposure to asbestos."
Wilt likened these asbestos models for insurers to a car from the 1980s. Assuming the car has had one major tune-up on it since the 1990s, it is now roughly 25 years and 100,000 miles later and "most cars are going to need more than just an oil change."
Wilt said these actuary models are only getting oil changes.
The insurance models were developed based on research in the 1980s, which was "all well and good" 30 years ago when the models were first created, he says. Then in the 1990s, the models were recalibrated to account for life expectancy.
But Wilt says a lot has changed in society since that overhaul, including average smoking habits and asbestos exposure. He added that the models are tweaked each year with slight changes, but nothing major is done to modernize the system.
"It's not like the models haven't received any attention," Wilt said. "They do. But there are significant changes in the system that need to be overhauled rather than tweaked."
As for advances in medical knowledge, Wilt said people are living longer and asbestos-related disease is easier to diagnose thanks to high-resolution CT-scans.
Medical evidence is mounting, according to research cited by Wilt, revealing that there is no 'lower limit' below which asbestos fibers cannot cause mesothelioma.
"Meanwhile, the people most likely to make asbestos claims are living longer - long enough, in some cases, to be diagnosed with asbestos related diseases," Wilt said.
Asbestos fibers sit dormant in the lungs for decades before the damage is discovered. Previously, some of those who worked with asbestos-containing products didn't live long enough for mesothelioma, lung cancer or asbestosis to really set in.
"They are now living longer and living into their disease," Wilt said. "So they are alive to report asbestos-related illnesses."
Considering the "wave" idea, the first wave of asbestos-related claims came with miners and millers of asbestos.
The second wave came from people who handled asbestos-containing products regularly at work, such as plumbers, shipbuilders and carpenters. Wilt said insurers increased their reserves in the early 2000s when the second wave hit.
The third wave is dominated by lung cancer claims from individuals exposed to levels above background noise, "which are ostensibly lower quality than those of mesothelioma because the cancer was predominantly caused by smoking rather than asbestos."
Wilt argues that actuarial models do not take the rate of increase in smokers' cases into consideration, resulting in inappropriately calibrated models.
If claimants are demanding compensation in asbestos litigation, but most likely developed lung cancer from unhealthy smoking habits, then how do insurance companies sort out the genuine claims from the fraudulent ones?
Wilt said that it may be difficult to disentangle the two. However, citing medical research, he noted that the combination of smoking and asbestos exposures make for a hazardous situation.
Wilt said asbestos is dangerous enough on its own. When smoking is thrown into the mix, it creates a supra-additive.
"People have known for a long time that smoking is bad, asbestos is bad," Wilt said. "Put the two together and it's really bad.
"People who choose to smoke are creating a self-inflicted wound."
In a medical study titled "Asbestos, Asbestosis, Smoking, and Lung Cancer," conducted by the Center for the Biology of Natural Systems at Queen's College and the Department of Preventative Medicine of Mount Sinai School of Medicine in New York, researchers evaluated the effects of fairly uniform long-term heavy exposure to asbestos in insulation workers.
The study found that asbestos and smoking made an ugly combination for lung damage.
"Asbestos exposure alone increases lung cancer mortality among nonsmokers and adds to smoking-associated lung cancer risk," the report stated.
Medical research also indicates that short, intense bursts of asbestos exposure can lead to illness. So if someone renovates a home and deals with high levels of asbestos without the proper safety techniques, asbestos damage in the lungs could be a problem later.
According to the Queen's College and Mount Sinai study, asbestos-related lung cancer deaths among insulators was strikingly similar for both smokers and nonsmokers.
"Lung cancer remains the dominant cause of death among insulators, killing one in five over the past three decades," the study found.
"The risk of lung cancer death among insulators who had quit smoking at least 30 years previously converges with that of never-smoking insulators," it continued.
Wilt said these lung cancer cases could continue increasing drastically due to a new recommendation from the U.S. Preventive Services Task Force that all current and former smokers between the ages of 55 and 80 receive annual CT scans, which adds up to about 10 million people.
Wilt said it is his understanding that the Affordable Care Act, or Obamacare, may cover the cost of these annual CT scans, which "greases a pathway" for smokers and those with asbestos exposure to get early screenings.
He added that many of those new cases could be valid, but it may also bring false claims out of the woodworks where people claim asbestos-related cancers where there was no exposure.
With an influx of new lung cancer cases, many of which could be fraudulent, it could put a strain on asbestos trusts, depleting their reserves of money, as well as insurers, he says.
"As an observer, it seems like a recipe for trouble," Wilt said.
As if asbestos litigation wasn't already on the rise, the report also attributes possible increases in lung cancer asbestos lawsuits to social media and its ability to reach larger crowds.
"We believe this third wave will be aided by the growing prevalence of social media sites such as Google and YouTUbe, which have lowered the cost of prospecting for claimants by lawyers. If you need convincing, type the name of any well-known asbestos law firm into a search engine and see how fast they come back to you with offers of direct conversation," said Alan Zimmermann, managing director of Assured Research and co-author of the report.
"The confluence of outdated actuarial models, sifts in life expectancies, medical knowledge, social media, and now recommended screening, can't be good news for insurers that are funding higher than expected claims on a pay-as-you-go basis," Wilt added.
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