A new report shows that the insurance industry is widely invested in fast food and tobacco giants, raising questions about conflicts of interest.
A peer-reviewed study by a group of Harvard Medical School researchers published in the American Journal of Public Health found that major health and life insurance companies are “substantial investors in the fast food industry.”
Northwestern Mutual, which offers life, health, and long-term disability insurance, is the largest of the group, with total investments of $422 million -- $318.1 in McDonald’s (MCD) stock, $63.2 million in Kentucky Fried Chicken parent Yum Brands (YUM), and $40.9 million in Jack in the Box (JACK).
MassMutual owns shares of McDonald’s worth $267.2 million, has $58.8 million invested in Burger King (BKC), $23.1 million in Jack in the Box, and has a $17.4 million stake in Yum.
New York Life and MetLife (MET) have the least skin in the game -- New York Life owns $2.4 million of Jack in the Box stock, and MetLife owns $2.2 million of Wendy’s (WEN) shares.
“Basically, the numbers show that the insurance industry cares first and foremost about making a profit and will throw grandma under the bus -- or into a McDonald’s -- if that’s what it takes,” J. Wesley Boyd, MD, PhD, an assistant clinical professor of psychiatry at Harvard Medical School and senior author of the study, tells Minyanville. “The toll fast food takes both in personal health and national health is quite high.”
Boyd explains that insurers can extract higher premiums from people exhibiting health problems that can be brought on by fast food, such as high blood pressure, cardiovascular disease, elevated cholesterol, and obesity.
He also points out that, while “investing in companies whose products undermine health while selling health or life insurance may seem inconsistent, there are several potential explanations.”
One is that the return on investment in fast food companies more than offsets the potential liability associated with their policyholders consuming fast food.
Another is that at insurance companies, which are large organizations, the claims and underwriting divisions may be unaware of the investments the financial divisions are making.
Andrea Austin, the assistant director of corporate relations for Northwestern Mutual, says investing in fast-food stocks doesn't represent a conflict of interest for the company.
"We have to determine what's going to give our policy owners value," she says. "We have to make sure we fulfill our obligations to them, and to do that we invest in a wide variety of industries. It's that diversification that enables us to return value to them."
She also disputes the figures quoted in the study, saying Northwestern Mutual’s total investment in fast food is only about $250 million, or one-fifth of one percent of the company’s portfolio.
Mass Mutual also disputes the numbers.
“The insurance companies always say the numbers are inflated,” Boyd tells Minyanville. “But every one of them has been fact-checked by the American Journal of Public Health.”
Many fast-food chains are making an effort to provide healthier menu options such as salads, and Boyd notes that fast food, when consumed in moderation, is not necessarily deadly, as tobacco is.
Which, interestingly enough, is another investment insurance companies seem to tend toward.
An analysis by Boyd published in the New England Journal of Medicine last June found that seven insurance companies held a total of $4.4 billion in tobacco-company stock.
In case you were wondering, Northwestern Mutual and Mass Mutual were on that list too, with a combined $614.8 million dollars invested in Altria (MO), among others.
The box may be red, but there’s a lot of green in Marlboro Country.
