Wall Street Can Sell Bets on Your Life

“You can bet your life” or shortened to “you bet your life” or shortened further to “bet your life” or shortened even further to “you betcha” are versions of the same slang. While the short versions are usually applied to trivial assertions, the longer versions are sometimes used to emphasize certainty on issues of importance. In 2008, Vice Presidential candidate Sarah Palin used the phrase “you شرط ایران betcha” to cloak her statements with a frontier authenticity. She was Governor of Alaska but chose to re-enforce her rugged bea-r-hunting image rather than her administrative experience and grasp of global issues.What is the dice betting game and how to win it?

Of course, you can bet on your life. Life insurance companies are in the business of taking you up on such bets. It is a common-sense wager for both you and the insurance company. They provide money to support your family if you die prematurely; they make money if you live beyond the term of the policy or your life expectancy. However, in addition to taking a gamble that you will live at least as long as expected, the life insurance company factors administrative costs and a profit into the premium. With life expectancies rising, life insurance companies also get to collect additional premiums before having to pay out benefits. Therefore, additional life insurance is not usually a good investment strategy for other financial goals.

Strangers can also bet on your life–as an investment strategy. The stakes are still your life, but in this case you are not at the craps table. The dealer at that craps table is a company that buys and sells life insurance policies. These companies do not just build in a modest cost factor for administration and a reasonable profit. Unlike a life insurance company, they don’t care how long you live or their long-term credibility. All they have to do is buy your life insurance policy and then entice an investor at the craps table to place one bet that you will die soon enough for the investor to make a profit on your death. Each year you live, beyond the paid-up premiums, requires the investor to pay additional life insurance premiums on top of the original price that he paid for your life insurance policy. The investor hope you die ASAP. (Criminals might help the process along-if they know whose life they need to shorten in order to collect.) The dealer, on the other hand, doesn’t give a damn if you live to 100. He has made a handsome profit on the one-time sale of your life (insurance policy).

Actually, it’s been true for a long time that a person can buy a life insurance policy on a life besides their own life. In 1911, the Supreme Court decided that a life insurance policy was property and thus could be bought and sold. There are good reasons to buy a life insurance policy on the life of a business partner. Through a “Buy-Sell Agreement” the proceeds are used to pay off the heirs of the deceased partner. Relatives often buy a small life insurance policy on the life of someone whose funeral they might be responsible for. Some parents buy life insurance policies on their children because the children might not be able to get insurance later in life because of a medical condition. Ownership of such policies is typically transferred to the child after he is responsible enough not to cash it out for a fancy car or a gambling trip to Vegas.

For a hundred years, people have been buying individual policies on other people’s lives. When the policy was issued, the buyer had to have a bigger stake in the insured person’s continued well-being than in his death. However, once issued, any policy could be sold and resold to anyone.

As the country’s banking system centered on Wall Street, and world’s overall financial structure, first bloated and then imploded in the past decade, betting on other peoples lives became an alternative investment opportunity with many of the same unethical characteristics of the mortgage-derivative schemes that brought on the Great Recession of 2007-2009.

Brokering firms matched sellers of life insurance policies with buyers. Some dealers enticed sellers to the craps table with the accurate promise of a quick, but modest, profit. Individuals were encouraged to buy new a policy on their own lives and immediately sell the policies to the dealer. Other sellers were desperate for cash and sold policies they already owned on their own life. Other sellers sold policies they owned on someone else’s life.

Some buyers were approached on humanitarian grounds with a sinister sales pitch like: “The owner of the policy has AIDS and needs cash for medications. And, of course, since he has AIDS, his life expectancy is short. So you can help him out and make a big profit at the same time.” Some investors might have resisted the sales pitch because they were concerned that the AIDS victim might have a family-a family that had suffered financially while caring for the patient and might need the life insurance payout to pay for the funeral and pay off debts. However, there were plenty of investors who didn’t have ethical concerns or never thought about the needs of the former beneficiaries or even the fact that their were other beneficiaries before the policy was sold.

However obtained, the life insurance policy was then marketed with a bogus medical report stating that the seller was in poor health and would likely die soon. The charlatan doctor just wrote out realms of medical opinions that bore no relation to the insured’s health. The doctor certified wildly low life expectancies. As the system grew and evolved, the dealer might throw multiple dice on the craps table at one time. Packages of life insurance policies could be sold to investors like bundles of mortgages had been before the housing bubble burst. The original buyers of a bundle of life insurance policies could sell their interest on the secondary market. The policies might even be packaged a second time by another firm. In a capitalist country with a free market system, life insurance policies are property and can be transferred freely between a willing seller and a willing buyer-like automobiles and homes and, at one time, slaves.

 

Leave a Reply

Your email address will not be published. Required fields are marked *