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>But absent meaningful regulation around the practice, it grew unchecked, and soon companies were taking out policies on many poorly paid employees like janitor

by personZ 12y ago

>But absent meaningful regulation around the practice, it grew unchecked, and soon companies were taking out policies on many poorly paid employees like janitors, then reaping millions in profit when they died. Most of the article is about Universal Life products, which is a product that is generally considered an enormous scam (it is a really poor investment vehicle), however this part really stood out. Anyone planning on making money through insurance needs to understand that the house odds are against you, at least unless you have insider knowledge or are hiring hit men. Insurance companies are very very smart, and you won't profit by trying to play the odds against them, especially and most certainly in the aggregate. So you come to the reality that this is wholly a tax avoidance scheme (sometimes legal, sometimes not). Not really about profiting from death, or usurping someone's great insurance payout, but simply hiding money away for some period of time. This is a tax code discussion that has perilously little to do with life or mortality. Just taxes and ways around them.

cacainmycafe 12y ago
Yeah, morality has nothing to do with anything. Say, if all of your neighbours bought insurance on your property, and the one day it collapsed, then there would be nothing immoral about that, but I bet you would not feel to great when they waved their piles of sweaty cash in your face over the rubble of your home. Now swap home for dead relative. See? Life is not black and white, but, it seems, is certainly good for payoff or two.
- vacri 12y ago
  Giving your neighbours a solid incentive to see your house collapse is immoral. Their lives are not affected if your house is destroyed, but they gain financially. Cue shenanigans.
- nawitus 12y ago
  >Say, if all of your neighbours bought insurance on your property, and the one day it collapsed, then there would be nothing immoral about that I agree, if the neighbours had nothing to do with the collapse.
  - Crito 12y ago
    I can even think of situations where it would make sense to take out insurance on your neighbors home. For example, if you observe that your neighbors are hoarders, you might try to get insurance on their home in anticipation of the home's eventual condemning (which would wreck your homes value through geographical association). The only problem there is that I suspect that the insurance company would not be particularly keen on that.
    - secabeen 12y ago
      Yeah, that's why you generally need an Insurable Interest in someone to buy life insurance on them: http://en.wikipedia.org/wiki/Insurable_interest http://en.wikipedia.org/wiki/Insurable_interest
downandout 12y ago
>This is a tax code discussion that has perilously little to do with life or mortality. Just taxes and ways around them.. I'm not sure that this is just about taxes. Walmart, for example, made headlines for taking what the industry affectionately calls "dead peasants insurance" on many workers. They realized that low wage workers, unlikely to be able to afford routine doctor's appointments, maintain health and dental insurance, etc. would have a lower average age of death than other workers even if they were currently in good health and easily insurable. Walmart knew answers to questions the insurance companies weren't asking, and made this bet. As morbid as it sounds, this is nothing more than a numbers game, like the stock market or daily fantasy sports. Better information equals better results. Smart companies only do this when they believe they have an edge (though if they are worried about PR, they won't do it at all).
- personZ 12y ago
  Walmart's case was entirely an elaborate tax dodge. They had no inside information (insurance companies know far more about the probable lifespan of Walmart's employees than Walmart does), and the scheme was entirely predicated on avoiding taxes at every level. Pay $75,000 per employee over the term of the policy to insure them, 100% of that being written off. Get paid out $60,000 per employee, 100% of that payout being tax free. In Walmart's case the insurer even loaned Walmart the entire cost of the policies, allowing Walmart to then write off the interest, never pay a penny until they had to close out the policy and pay out the difference. Insurance companies are not in the business of losing money (they actually make a tonne of money, and are one of the most reliably profitable businesses operating), and they have a much better edge than Walmart or any other employer does. Smart companies only do this when they believe they have an edge And insurance companies only engage in clients or organizations when they know they have an edge -- a large part of the very sophisticated science of underwriting is ensuring that the insurance is highly probable to benefit the insurer, outside of very long odds. Any scheme that assumes otherwise has to involve egregious criminality (such as others are speculating throughout this thread, as if employers are then offing their employees, the dumb insurance companies none the wiser).
bcoates 12y ago
They aren't that smart, some little old ladies in my town made a couple of million dollars by buying multiple life insurance policies on bums, then running them over. They apparently got caught by cops for the hit-and-run, because nobody at the insurance companies even noticed what should have been an improbably suspicious pattern of policies and payouts.

by personZ 12y ago

cacainmycafe 12y ago

Yeah, morality has nothing to do with anything. Say, if all of your neighbours bought insurance on your property, and the one day it collapsed, then there would be nothing immoral about that, but I bet you would not feel to great when they waved their piles of sweaty cash in your face over the rubble of your home. Now swap home for dead relative. See? Life is not black and white, but, it seems, is certainly good for payoff or two.

vacri 12y ago
Giving your neighbours a solid incentive to see your house collapse is immoral. Their lives are not affected if your house is destroyed, but they gain financially. Cue shenanigans.
nawitus 12y ago
>Say, if all of your neighbours bought insurance on your property, and the one day it collapsed, then there would be nothing immoral about that I agree, if the neighbours had nothing to do with the collapse.
- Crito 12y ago
  I can even think of situations where it would make sense to take out insurance on your neighbors home. For example, if you observe that your neighbors are hoarders, you might try to get insurance on their home in anticipation of the home's eventual condemning (which would wreck your homes value through geographical association). The only problem there is that I suspect that the insurance company would not be particularly keen on that.
  - secabeen 12y ago
    Yeah, that's why you generally need an Insurable Interest in someone to buy life insurance on them: http://en.wikipedia.org/wiki/Insurable_interest http://en.wikipedia.org/wiki/Insurable_interest

downandout 12y ago

>This is a tax code discussion that has perilously little to do with life or mortality. Just taxes and ways around them.. I'm not sure that this is just about taxes. Walmart, for example, made headlines for taking what the industry affectionately calls "dead peasants insurance" on many workers. They realized that low wage workers, unlikely to be able to afford routine doctor's appointments, maintain health and dental insurance, etc. would have a lower average age of death than other workers even if they were currently in good health and easily insurable. Walmart knew answers to questions the insurance companies weren't asking, and made this bet. As morbid as it sounds, this is nothing more than a numbers game, like the stock market or daily fantasy sports. Better information equals better results. Smart companies only do this when they believe they have an edge (though if they are worried about PR, they won't do it at all).

personZ 12y ago
Walmart's case was entirely an elaborate tax dodge. They had no inside information (insurance companies know far more about the probable lifespan of Walmart's employees than Walmart does), and the scheme was entirely predicated on avoiding taxes at every level. Pay $75,000 per employee over the term of the policy to insure them, 100% of that being written off. Get paid out $60,000 per employee, 100% of that payout being tax free. In Walmart's case the insurer even loaned Walmart the entire cost of the policies, allowing Walmart to then write off the interest, never pay a penny until they had to close out the policy and pay out the difference. Insurance companies are not in the business of losing money (they actually make a tonne of money, and are one of the most reliably profitable businesses operating), and they have a much better edge than Walmart or any other employer does. Smart companies only do this when they believe they have an edge And insurance companies only engage in clients or organizations when they know they have an edge -- a large part of the very sophisticated science of underwriting is ensuring that the insurance is highly probable to benefit the insurer, outside of very long odds. Any scheme that assumes otherwise has to involve egregious criminality (such as others are speculating throughout this thread, as if employers are then offing their employees, the dumb insurance companies none the wiser).

bcoates 12y ago

They aren't that smart, some little old ladies in my town made a couple of million dollars by buying multiple life insurance policies on bums, then running them over. They apparently got caught by cops for the hit-and-run, because nobody at the insurance companies even noticed what should have been an improbably suspicious pattern of policies and payouts.