The Wall Street Journal has a piece titled “Insurers Sued Over Death Bets: Scrutiny on Secondary-market Policies That Paid Investors When Others Died” by Leslie Scism
The story runs something like this. Old people take out insurance on themselves. Then they sell it to investors, who collect on the insurance if the old person dies. It is very similar to the same racket that various companies, such as Wal-mart, are involved in with taking policies out against their employees.
The insurance companies were taking their fees, and occasionally one of the old people would die, but of course the actuary tables should be able to take that into account: right?
Apparently not. Because the insurance companies have been denying benefits, and preemptively canceling policies. Why?
Well buried in the seventh paragraph we find out:
The life-policy secondary market was one of many sent reeling by the global financial crisis of 2008-09, but it also has been hurt by revised actuarial tables, which show older people living longer…
What, say it is not so! The insurance companies denying benefits because they found an error in their tables! It is not possible.
The insurers contend they are acting in the name of good public policy: State insurable-interest laws require an insurance buyer to have a bigger stake in the insured person’s continued well-being than in his death.
Mind you these are the people that have begun data-mining social networking sites to help to obtain additional information on prospective client that would likely not pass muster with the FTC if asked on an insurance application link. But that is different: they aren’t losing any money doing that!
