April 29, 2019

Stanton A. Glantz, PhD

PMI’s new life insurance company to help sell IQOS doesn’t make financial sense

CNBC reported that PMI is starting a life insurance company in the UK that will give discounts to smokers who switch to e-cigarettes (2.5% discount) or its heated tobacco product IQOS (25% discount).  Smokers who quit entirely get 50% off.

It will be interesting so see how long this lasts, since it is fundamentally unsound financially.  PMI’s own data shows that IQOS is no safer than conventional cigarettes in terms of clinical measures of effect (even though it lowers exposure to some toxins, while increasing exposure to others).  (More blog posts on IQOS.) Another think that does not make financial sense is treating IQOS as less toxic than e-cigs.  Independent research shows that IQOS delivers more toxins than e-cigs.

The fact that the e-cig discount is so small is certainly consistent with the growing evidence that e-cig risk is approaching that of conventional cigarettes. 

Finally, another part of the scam is that most smokers who use e-cigs or IQOS keep smoking at the same time, meaning that they actually increase their risks of disease.  PMI doesn’t give them a discount.  Maybe it should have a surcharge.



Perhaps it makes financial sense if the expected losses are in the range of reasonable for marketing IQOS. Japan Tobacco has sold processed food products in Japan for many years -- in what might at first appear to be a poor investment. But if one thinks of the investment being for other benefits from having that line of business, (e.g., in that case, keeping the company's name active in broadcast advertising), the scheme becomes easier to understand. Any losses or weak ROI are just a modest marketing expense for the more important domestic cigarette business.

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