The only way I can state this with absolute clarity is the following:
A vulnerability is a vulnerability is a vulnerability.
Not patching the problem is an exercise in extreme irresponsibility.
- Possible privilege escalation.
- Crashes from corrupt input files, leading to bad UX and other nasties.
- If a user sees an innocuous file (i.e. not an executable), they may assume that it is safe to use, then get pwned when it turns out to be full of shellcode.
- You could be shipping the installer with security-sensitive software.
- Your customers pay you money. Do right by them, because they keep your company afloat.
- If some blackhat exploits your flaw, it'll be a PR nightmare, and you'll have to fix the bug anyway. It makes financial sense to spend the developer time on this now, rather than later.
- If the public find out that you knew about this and never fixed it... well, you get the picture.
- You can and will be sued by companies that lose data due to vulnerabilities in your code, especially if they know you could've prevented it.
Finally, an ethical reason. If your installer is as prevalent as it sounds (e.g. the likes of InstallShield, Nullsoft, etc) you'll most likely have customers whose software is security-sensitive. This could be something as important as TrueCrypt or Tor, where people can literally get hurt or killed over security failures.
Do the right thing. Fix the bug. If he's resistant even after this, you might want to offer to do it on your own time, even if it sucks that you have to work unpaid.
On a slightly less serious note, if I find out I'm running your installer software, and I find out that you have to bitch at management to fix a security bug, I'm probably going to run away from your company like this: