Sunday, September 06, 2009

Life insurance companies want to securitize "viatical" settlements, gambling on life spans: a moral question about end-of-life?

Jenny Anderson writes a rather shocking front page story for the Sunday Sept. 6 New York Times in which Wall Street plans to offer “viatical” settlements of life insurance policies for ill or largely elderly people, the “securitize” the policies into bonds. The bondholders would lose out if the people live longer than expected, which is becoming increasingly likely given the way medicine progresses, where it is sometimes easier to prolong biological life for its own sake than it is to preserve quality of life and activity.

This sort of device has been developed before for people with AIDS (back in the 1980s) but we could see insurance agents and salesmen approaching seniors with such concepts in the future. It’s a bit hard to take.

The online version of the story is “Wall Street Pursues Profit in Bundles of Life Insurance”, but the print version is titled “New exotic investments emerging on Wall Street: Packaging life insurance policies, despite fallout from mortgage crisis”, with the link here.

As I've noted before, I was approached in 2005 by a couple of life insurance companies to become an agent (given my twelve years in information technology in insurance -- which doesn't mean I would want to sell it, sorry). Imagine how I would feel trying to sell a client on some kind of securitizable bet on his life. I think it's ghastly. It's all manipulation.

Also, today, The Washington Times has a lead op-ed by Dr. Robert L. Fine, “A model for end-of-life care? Texas law balances interests of patient and doctor”, link here. This is a discussion of the Texas Advance Directives Act of 1999. However, an earlier op-ed in this paper (discussed in the August 11 2009 posting, with Aug. 19 “update”) had been very critical of the Texas law.

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