Tobacco industry plan to attack the insurance industry over non-smoker rates

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This article is part of the Tobacco portal on Sourcewatch funded from 2006 - 2009 by the American Legacy Foundation.

A November, 1989 Tobacco Institute memo reveals a far-reaching tobacco industry plan to pressure the insurance industry to eliminate non-smoker discounts, complete with the formation of a "consumer rights" front group, headed by a "key 'consumer rights' nemesis of the insurance industry,' who, according to the memo "demands no less than $5,000 a month" for his services to the tobacco industry. The purpose of this fake "consumer group" was to encourage the media to focus broadly on "discriminatory practices of the insurance industry" with the hidden goal of eliminating non-smoker discounts. The strategy of broadening the issue tracks closely with the strategy the industry has used with secondhand smoke to deflect attention from their products. They took the focus off the health consequences of secondhand smoke by "broadening" the issue into one of building ventilation instead of cigarettes.

A handwritten note in the upper right corner of the memo from one of the recipients to the other indicates the Tobacco Institute's intent for the plan:

"Susan - Interesting. Might work if we could wrap smoker discrimination into a package of other credible forms of discrimination. Industry will not take this attack lightly and will fight back fiercely. We would have to have a strong attack and a good defense.."

The document states,

More and more corporations are voluntarily adopting policies banning or severely restricting smoking in their workplaces. Many employers believe stringent smoking policies will reduce their health care costs, any many insurance companies are fueling this "conventional wisdom" by marketing anti-smoking incentives, such as nonsmoker discounts on group health insurance policies.

Several months ago, I asked Peter G. Sparber to assess the prevalence of anti-smoking practices by the insurance industry and to consider ways The Institute might combat them....

... Attached are two memoranda Peter prepared at my request. The first proposes a program to discourage the anti-smoking practices of the insurance industry by raising executives', regulators' and legislators' awareness of the discriminatory nature of nonsmoker discounts. John Ingram, once a key "consumer rights" nemesis of the insurance industry, would be the lynchpin of the program. Ingram would create a consumer rights group on behalf of which he would speak and publish to expose and eliminate the insurance industry's most common discriminatory practices....

...Ultimately [Sparber's proposal] is designed to eliminate one of the perceived incentives -- lower insurance costs -- for adopting a voluntary [smoking] ban.

At the same time, the proposal is expensive. Ingram demands no less than $5,000 per month for six months plus expenses, and Sparber....$3,000 per month.

...I recommend that The Institute fund the program on a six-month trial basis...[1]

Tobacco industry aggression against the insurance industry

Aware that cigarette smokers incur more health expenses than non-smokers, the American insurance industry started offering lower premium rates for non-smokers in the late 1980s and early 1990s. The tobacco industry interpreted this as creating "smoker markups." Lower insurance rates for non-smokers stimulated employers to encourage smoking employees to quit, provide smoking cessation clinics for employees, etc. Awareness increased among employers of the extra costs incurred when hiring smokers. The tobacco industry, then, perceived lower insurance rates for non-smokers as a threat to their profitability and began a war against the insurance industry.

One objective of the Tobacco Institute's anti-insurance industry plan was to fan the flames of resentment against the insurance industry, saying:

...[D]isaffection with the [insurance] industry's underwriting practices...should be sustained and enhanced...

Plans to manipulate media, legislatures, consumers

Part of the Tobacco Institute's plan was to develop "information kits" to give to the "news media, regulators, business and labor leaders and legislators." These kits were to contain materials describing the need for more regulation of the insurance industry because of its "discriminatory practices." They would describe "insurance industry abuses" and highlight the insurance industry's profitability. The Tobacco Institute also planned to put on "insurance reform seminars," and give "special briefings for journalists, legislative and regulatory staff." They planned to "attend major insurance regulator meetings, place speakers on programs" and "encourage placement of articles in publications of these associations." They also planned to "produce and place an 'insurance shopping tips' column to alert consumers to unfair practices." They further planned to draft model legislation to regulate the insurance industry, introduce it to legislators and place pro-tobacco witnesses in the hearings for these bills. [2]


  1. John Lyons, Tobacco Institute Anti-Smoking Practices of the Insurance Industry, Memorandum. November 22, 1989. 2 pp.
  2. Tobacco Institute Discouraging Health Insurance Industry Discrimination Against Smokers Report. Confidential. Minnesota selected document. April, 1991. 13 pp. Bates No. TIMN0034631/4643

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