Well, that's kinda dumb to not mention it, as they're going to TEST for it, and it's going to come up positive. Denying tobacco use isn't going to do anything except annoy your agent (after all, he's trying to work for you, and you're lying to him!) and get you declined.

If you're buying a very small policy, like $10,000, where they won't test, then yes, the company can deny a claim based on fraud - which is what he's doing.

Next time he complains about insurance rates, remind him that the high fraud rates (and attempts) help contribute to high rates - and HE advocates fraud.