The Obesity Drug Boom: What Actuaries Must Rethink

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The rapid rise of weight loss drugs especially GLP-1 receptor agonists like liraglutide (saxenda), semaglutide (Ozempic, Wegovy) and tirzepatide (Mounjaro, Zepbound) has sparked a paradigm shift in healthcare. Once developed primarily for managing type 2 diabetes, these medications have demonstrated impressive efficacy in reducing body weight and controlling obesity-related conditions. As prescriptions surge globally, health and life insurers are beginning to reassess traditional assumptions about risk, cost, and long-term claims. For actuaries, these changes present a new frontier in modeling healthcare utilization, morbidity, and longevity.

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The Rise of Anti-Obesity Drugs and Their Clinical Impact

GLP-1 and GIP/GLP-1 medications work by mimicking natural hormones that regulate appetite, insulin sensitivity, and gastric emptying. Clinical trials and real-world evidence have shown that they can lead to 15–20% weight reduction in many patients a figure once thought achievable only through bariatric surgery.

This weight loss is not cosmetic; it’s medically significant. Sustained reductions in weight are associated with decreased incidence of type 2 diabetes, hypertension, sleep apnea, non-alcoholic fatty liver disease (NAFLD), cardiovascular events, dementia, alzheimers, cancers, mood disorders and addiction management. NAFLD was noted as affecting 30% adults worldwide even those with never consuming alcohol. In 2023, medical advances showed that NAFLD actually showed worsening metabolic health and so it was renamed as MASLD (Metabolic dysfunction-associated steatotic liver disease). As such, these drugs have the potential to dramatically alter the burden of chronic disease especially in populations where obesity is a leading contributor to morbidity and mortality.

While it seems that these GLP-1 drugs might be closest to a miracle drug that we have invented so far, not everyone can use these drugs due to side effects like stomach upsets. Even those who can take these drugs, might not be able to take it to the concentration that leads to sustained weight loss, leading to weight being stuck again. These drugs have a black box warning for thyroid cancers as well. Another big challenge is that most of the weight lost can be gained again upon discontinuing the drugs. Lastly, the weight loss might also be from lower mass in muscles and bones instead of loss only in fat so this increases fragility risk, especially for senior people.

Actuarial Recalibration: From Risk Pools to Risk Profiles

Actuaries traditionally assess health and life risks based on established predictors such as age, BMI, comorbidities, and lifestyle indicators. With the widespread adoption of effective weight loss medications, these assumptions must be revisited.

If a significant proportion of the insured population begins losing weight and sustaining better metabolic health, the long-term incidence rates of chronic diseases may decline. This affects both short-term healthcare cost projections and long-term mortality assumptions. Conversely, if only high-income, employer-covered, or privately insured individuals can afford or access these drugs, health disparities may widen, leading to increased adverse selection and stratified risk pools. Weight loss can rebound upon discontinuance of these drugs, so actuaries have to take this into their lapse assumptions as well. For example, adverse selection scenario can be that person loses weight using these drugs, gets better long-term life insurance premiums and afterwards stop using these drugs, gaining the weight back and meaning that short term gain was reversed easily. This would increase risk again and so should be charged accordingly.

Actuaries now face the challenge of modeling both the penetration rates of these therapies and the persistence of clinical outcomes, especially as adherence rates, side effects, and long-term safety profiles remain under study.

Short-Term Cost Pressures on Health Insurance

Despite their benefits, GLP-1-based drugs come with high upfront costs often exceeding $10,000 per patient annually in the U.S. For health insurers, this raises concerns about budget impact, especially when demand increases rapidly and without clear prior authorization guidelines. The costs are much lower in other than US countries but awareness and purchasing power are generally lower there.

Insurers must weigh the short-term rise in pharmacy costs against potential medium- to long-term savings from avoided hospitalizations, surgeries, and chronic condition treatments. Value-based pricing models, outcomes-based reimbursement contracts with drug manufacturers, and clinical eligibility criteria are being explored to balance affordability with access.

Additionally, formulary design is becoming more complex. Payers may limit access based on BMI thresholds or the presence of comorbidities, while some employers and public plans may choose not to cover these drugs at all raising ethical and public health concerns.

Implications for Life and Disability Insurance

Beyond health insurance, weight loss drugs also have significant implications for life and disability insurers. Obesity is a well-established risk factor for early mortality and long-term disability claims. If new pharmacotherapies can reduce these risks at scale, insurers may see improvements in underwriting experience, fewer claims, and potential recalibration of mortality tables.

However, much depends on durability do patients maintain weight loss after discontinuation? Is the drug taken continuously for life, and how will this affect long-term health outcomes, organ systems, or mental health? These uncertainties make it difficult to project lasting benefits at the individual level.

Moreover, if insurers begin incorporating GLP-1 therapy usage into underwriting decisions whether positively (discounted premiums for adherent users) or negatively (flagging risk of future complications) regulatory and ethical frameworks will need to catch up.

Data and Modeling Challenges

For actuaries, capturing the impact of these drugs requires new data sources and modeling techniques. Electronic health records, prescription databases, and wellness programs may offer insights into patient adherence and real-world effectiveness. But this also raises data privacy and standardization concerns.

Multi-scenario forecasting ranging from low to high adoption, and variable price drops due to biosimilars is essential. Machine learning may play a role in projecting individualized risk shifts based on a member’s medication history, weight trends, and comorbidity progression.

The volatility of the pharmaceutical pipeline must also be factored in. With several next-generation weight loss therapies in development, the competitive landscape could drive down prices, expand access, and increase variability in outcomes.

Policy, Equity, and Ethical Considerations

Insurance cannot operate in a vacuum. Public health advocates warn that if weight loss drugs are treated as luxury wellness tools rather than essential medical therapies, low-income and marginalized communities often with the highest obesity burdens may be excluded. This could entrench existing disparities in health outcomes and longevity.

Insurers and regulators must ensure that coverage decisions are guided by clinical need and evidence, not just cost containment. In the long run, incorporating weight loss pharmacotherapy into standard treatment protocols could shift the broader health system from reactive disease management to proactive risk reduction.

Conclusion: A Tipping Point for Actuarial Science and Healthcare Strategy

Weight loss drugs represent more than a pharmaceutical breakthrough; they symbolize a shift in how healthcare systems might prevent, rather than just treat, chronic illness. For insurers and actuaries, this is both an opportunity and a disruption. Risk models must evolve. Pricing strategies must become more dynamic. Ethical frameworks must guide access and underwriting.

As more people embark on this medical weight loss journey, the industry must prepare for a future where body weight, once considered a fixed actuarial input, becomes a managed and modifiable risk factor one with sweeping implications for morbidity, mortality, and the economics of insurance itself.

Syed Danish Ali is an actuarial consultant with 15 years’ experience across multiple global markets; certified in predictive analytics (iCAS) and graduate of University of London.