When Insurance Companies Have Vested Interest in Your Death…
04/04/2006: These scenarios could provide fodder for novelists.
In the case of M. Smith, she was diagnosed with AIDS in the early 1990s. An insurance company–Life Partners–seeing a chance to cash in on her demise, offered to purchase her life insurance policy.
- The insurance policy was $150,000
- The company offered $90,000 up front, and to cover her life and health premiums if she lived more than two years.
Basically, Life Partners was hedging on the probability that M. Smith–who had full-blown AIDS–was going to die in short order (as, at the time, the survival rate for AIDS sufferers was very low).
They made the gamble, and lost the bet. M. Smith is still alive and kicking, thanks to advancements in AIDS treatments. While AIDS is still incurable, newer drugs have greatly increased the likelihood that AIDS sufferers can soon have manageable lives, on the same plane as diabetes sufferers.
As a result, Life Partners has tried to get out of their contract.
They need to pony up the money, and eat the loss. They made plenty of money off the deaths of others, but this time they lost. Quite frankly, I shed no tears for Life Partners. If you get in the business of profiting off death, and lose, then TS.
However, this dynamic could raise some interesting prospects. What happens if an insurance company has enough such contracts such that policyholder survival will result in low profits or–worse–insolvency?
Would it be outside the realm of possibility for such a company to hire professionals to “take care of the situation”?
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