We’re Betting You’ll Die

All this talk about death panels brings up a story recently covered by the New York Times. It’s about the potential profit to be made from old people by betting on when they’re going to die…

After the mortgage business imploded last year, Wall Street investment banks began searching for another big idea to make money. They think they may have found one.

The bankers plan to buy “life settlements,” life insurance policies that ill and elderly people sell for cash — $400,000 for a $1 million policy, say, depending on the life expectancy of the insured person. Then they plan to “securitize” these policies, in Wall Street jargon, by packaging hundreds or thousands together into bonds. They will then resell those bonds to investors, like big pension funds, who will receive the payouts when people with the insurance die.

The earlier the policyholder dies, the bigger the return — though if people live longer than expected, investors could get poor returns or even lose money.

Alternet has a scathing commentary on the potential for abuse…

Now if you’re going to have every Wall Street bank hungry for “life settlements” to package and securitize, you’re going to need a lot of brokers to trawl the nursing homes, hospice centers and hospitals for “products” — dying Americans. Much more than we have now (just as the number of mortgage brokers exploded when Wall Street needed mortgages for their securitized products). These brokers try to get to the dying American before his life insurance company does, or someone else — and offers them a better cash settlement for the policy than the insurance company might offer. Everyone sees that dying policy-holder as a source of profit — but only if that person dies as soon as possible after you snatch up the policy.

This has a precedent in the ‘viatical’ trade that sprang up in the wake of the AIDS epidemic. It is a source of deep satisfaction to me that many speculators lost money when their targets failed to die on schedule. In the late 1990’s antiretrovirals pulled thousands of people back from the brink and restored them to health, tanking the profit margin on their life insurance policies.

I hope it was not typical for the disappointed investors to try to get even, but this is from the Philadelphia Enquirer…

When M. Smith was diagnosed with cancer and AIDS in the early 1990s, she was given two years to live. That she is still very much alive today is good news to everyone but the people who bet big on her dying.

Had Smith perished on schedule, Life Partners Inc. (LPI) would have made $60,000 on a $90,000 wager – a 66 percent return on the investment. Instead, the company that expected to make a profit on Smith’s life insurance policy wound up spending $100,000 keeping her alive.

Now, Life Partners’ attempt to wriggle out of the relationship has led to one of the most morbid contract disputes ever filed in New Jersey Superior Court.

Smith, like many patients who received death sentences, sold her $150,000 life insurance policy to a viatical firm for $90,000. It was a perfectly legal, if macabre, means to a comfortable end.

But the deal was complicated by the fact that her life and health insurance were conjoined in a group policy marketed to the self-employed. LPI knew the terms, knew it would have to continue paying her health premiums, but signed the deal, expecting to make a killing on her death.

Instead, more than a decade later, Smith is still kicking.

And thanks to a pair of tenacious pro bono attorneys, LPI finally gave in and paid up.

The article has more about LPI’s hardball tactics.

It’s not realistic to expect Wall Street investment bankers to get a job, as long as they can play the numbers.

There will always be problems with government, but that doesn’t lead me to trust in corporations. Insurance corporations have a great deal of power, and profit will win unless they are regulated by the government. The government should take a good look at this new viatical scheme before we have fast-talking salesmen trying to hustle our parents. And won’t it be cool if we get some real health care reform, and the old folks refuse to die on schedule.

Here’s a link to Margaret and Helen, who weren’t born yesterday and have earned the right to speak their minds.

7 thoughts on “We’re Betting You’ll Die

  1. I just saw that an anti-abortion activist was shot and killed for carrying a sign someone didn’t like.I guess that won’t upset the “humanitarians”who cried tears over Tiller.

  2. Joe, if you want to create imaginary foes who don’t have any moral sense and don’t value human life, why are you arguing with me? I favor strong gun control and high standards of responsibility for anyone who wants to own one. I have had people calling me ‘baby killer’ and did not respond in kind. Every day I drive by a roadside shrine to Joseph Hector, a teenage boy who was shot to death in my neighborhood. I lived through the sixties when a succession of leaders both good and bad were killed or wounded for their politics.
    So go find those awful hypocrites who are just fine with gun violence when it’s someone they disagree with.
    I do cry over Dr.Tiller, who was in the medical profession and was helping women who were in situations no one would want to experience.

  3. I was actually aimmg my reamrks at others here,particularly one person who tried to insinuate the people like me were responsible for Tiller’s murder because we “listen to O’Reilly”(paraphrase).I don’t think you like to see anyone murdered,but neither do I.
    I recall the Hector murder-he was an innocent victim.
    Unfortunately,a lot of murder victims in this country are in a lifestyle where it shouldn’t be a surprise.
    I hope that young woman in New haven is found alive,but I’m not optimistic from the way things look.

  4. Joe, after our last go-round, I did some research.

    Turns out, the states with the laxest gun laws have–Suprise!!–the most gun-related deaths per capita.

    IOW, strong gun laws lead to fewer gun deaths.

    Let me repeat that: places with stronger gun laws have fewer deaths.

    It’s like with the taxes thing: we triedit your way once. We tried the whole “Wild West” thing. It didn’t work. It led to…more people getting shot.

    Chicago may be a shooting gallery, but it would be worse with lax gun laws.

    …three…two…one….

    Have you gone apoplectic yet? What sort of names are you going to call me this time?

    1. Call you names?You don’t matter enough to me.I don’t think this is your blog.If I’m off topic,which I definitely am,I guess the thread originator can delete my comments.When you establish a blog,you can be the editor.I wouldn’t be posting there in any event.
      I don’t know why you bother responding to what I write.You obviously think I am an ignoramus or whatever.That’s ok.There are people whose opinion of me matter,but none of them are faceless online posters.
      I don’t know what kind of research you did.It doesn’t matter.No government will either be able to nor be stupid enough try mass confiscation of firearms.I don’t think we travel in the same circles at all.I’ll leave it at that.
      You probably think the wannabe commandos who play videogames and wear camouflage and buy weapons because they’re “cool” are someone to worry about.They aren’t for the most part.
      People who have had weapons all their lives and treat them as tools and dress and act very normally are the ones you don’t want to push into a corner.They’re not even very political for the most part except for resisting being screwed with by social engineering busybodies who can never leave well enough alone.
      Most gun violence(excluding suicide)will be committed by people with criminal records who shouldn’t own guns.I don’t believe people should be able to buy firearms at gun shows with no background check.There is no excuse for it-the technology exists to conduct instant checks.Surprised?
      I’ve said this numerous times-in addition to,or in spite of,any gun laws,firearms violence will ocur more frequently in places where society is more violent generally.New England is one of the least violent parts of the country.
      The most violent parts of the country-Arizona,Illinois,Michigan(specific places in those states),Florida,Nevada,all have things in common.Transient populations are one factor.Maybe you don’t think of Michigan and Illinois in that way,but there is a lot of movement in those states.
      Gun laws aren’t a common factor.Nevada and Florida have lax gun laws.I think Michigan does also to some degree..Illinois definitely doesn’t.Washington DC for chrissakes-really tough gun laws,an overabundance of law enforcement and what?Lots of violence.Here’s what you miss.It’s the people who live in a place that make it violent.Smetimes climate has an influence.In snowy climes,it’s not that common for people to just go shoot up the street.Cold weather has a good psychological effect that way.Except for cabin fever.
      Bottom line-what people like you mean when you say you want common sense gun laws is nothing more than a cover for wanting to control more peoples’ lives and behavior.That is counterintuitive to American tradition.
      What was the tax comment about?I’ve never harped on taxes.Everyone has to pay their fair share.I do.Taxes are necessary for things to run normally.I just don’t like tax money pissed away.Do you?My federal taxes and local real estate tax make sense.I get various levels of services,plus national defense,etc.
      State taxes in RI are abusive and I’m not sure what if anything I egt fom the state.The roads are largely maintained by federal tax money.I don’t go to state parks more than once or twice a year,if that.Don’t confuse me with tax protesters or even vigorous opponents of this health care bill.I think with some attention to detail,it could be introduced with a public option included.Right now there are too may unanswered questions.I don’t take things on spec from ANY politicians.

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