Health insurers invest in tobacco

But Sun Life says medical journal has wildly overstated value of its cigarette stocks

Joseph Hall
Health Reporter

Canadian and U.S. health insurance companies – including Toronto’s Sun Life Financial Inc. – have more than $3 billion (U.S.) invested in the tobacco industry, a letter published today in the New England Journal of Medicine charges.

By refusing to quit their addiction to cigarette profits, the insurers lose any moral right to help set health policy, the letter’s Harvard University authors argue.

“Disgusting, depressing, I’ve heard a lot of words to describe the fact the insurance industry is invested in tobacco,” says Dr. Wesley Boyd, the letter’s lead author.

“By exposing their investments in tobacco, it pulls the rug out from under them in terms of saying they should be credible players (in health policy discussions).”

Boyd’s research shows Sun Life, which markets life, health and disability insurance in Canada and the U.S., has more than $1 billion invested in tobacco firms, with nearly $890 million in Philip Morris USA, the maker of Lorillard Tobacco Company shares and 1.1 per cent of Philip Morris stocks in March.

Boyd acknowledged there is a seemingly self-defeating aspect to insurance companies investing in a product that could cost them billions in paid out claims.

But, he said, insurers are simply “hedging” their bets with their tobacco investments, making up with their cigarette holdings some of the money they would lose to the stiff payouts that smoking costs them.

“They’re going to make money if you smoke by investing in tobacco and they’re going to make money if you don’t smoke because they’re going to pay out less,” he said.

As well, Boyd said, insurers typically charge smokers higher premiums. “So they get them on the front end by charging them higher premiums and then also making money … directly off their tobacco habit. It’s a bit like the combination veterinarian and taxidermy office which promises that either way you get your pet back.”

Boyd’s work is a follow-up to his group’s 1995 study, which revealed the insurance-tobacco nexus.

Leduc said Sun Life has a “solid record of responsibility” that extended to its investments. He said its investment in green energy projects was more than $1.2 billion and that it spent about $1 billion over the past three years to help build or renovate some 20 hospitals. “Together, these two categories alone (about 2 per cent of our investment portfolio) amount to nearly 500 times the size of `tobacco’ stocks.”

But Boyd said insurers, particularly in the U.S., lobby fiercely for private health coverage over public programs.

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