Taking Out Life Insurance Policies On Other People Should Be Illegal

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TTTIN

East Lansing, MI

#1 Oct 4, 2009
http://moneycentral.msn.com/content/Insurance...

This is sick. These people are profiting off of people dying.

This creates a perverse incentive. With the growing power of corporations I wouldn't be surprised if some purposefully started policies that would lead to more deaths. If they become too powerful to the point where investigating a corporation for crimes is almost impossible I wouldn't be surprised if corporations started murdering their employees to make more money.
TTTIN

East Lansing, MI

#2 Oct 4, 2009
It's illegal to take out a fire insurance policy on someone else's house for obvious reasons. The same principle applies to life insurance.

Since: Apr 07

Brentwood, TN

#3 Oct 4, 2009
This may sound sick but there is a very good reason behind it.

If an employee dies from a heart attack while on the job or in an accident away from the job site the employer looses a valuable asset. The employee who was generating money for the company. Once the employee dies the company is out that income generated by that employee. Not only that but the company must incur an added expense in finding, hiring and training his or her replacement. This could take several years to accomplish.

Then there is the expense of grief counseling for the other employees not to mention the time off the other employees take to go to the funeral.

So yea, in a sick way this is necessary part of doing business in America.
TTTIN

East Lansing, MI

#4 Oct 5, 2009
Jim Hayden wrote:
This may sound sick but there is a very good reason behind it.
If an employee dies from a heart attack while on the job or in an accident away from the job site the employer looses a valuable asset. The employee who was generating money for the company. Once the employee dies the company is out that income generated by that employee. Not only that but the company must incur an added expense in finding, hiring and training his or her replacement. This could take several years to accomplish.
Then there is the expense of grief counseling for the other employees not to mention the time off the other employees take to go to the funeral.
So yea, in a sick way this is necessary part of doing business in America.
By "necessary" you make it sound like the business will die if it doesn't do this. Most businesses that do this are already making windfall profits and have highly paid executives. They can definitely affoard to forgo these kinds of policies.

I can kind of understand for key employees like highly-paid professions and important executives. The article even points out this difference. But the only point in having these policies on rank-and-file employees is to make a profit. You're not going to go out of business because a rank-and-file employee dies. These policies have created a situation where it becomes more profitable for people to die than live. They should at least be limited to recovering costs from these policies, and not wind up with more money than they would have if the employee didn't die. The way these policies are set up death makes profit. In fact some companies had reports saying only 60% of the expected number of people died in a year negatively because they wanted more people to die because that meant more money.

I got a better idea. Let businesses take out a general policy on incidents that threaten to put it out of business, which would cover it if some people died but only if the resulting expenses pushed it over that edge. It could also cover other unforeseeable incidents. That way its not based on people dying its based on if people dying (or anything else that happens) almost destroys the company. If companies can have that kind of policy instead(and don't tell me there's no market for it. I'd be surprised if this hasn't been invented yet) then there's no legitimate reason for any of them to keep carrying life insurance policies on people which could lead to perverse incentives(by which I don't mean murder conspiracies just that companies notice when they relax safety precautions more people die and they get more money which becomes a feedback loop so the company starts making things unsafe on purpose).
TTTIN

East Lansing, MI

#5 Oct 5, 2009
I'll also point out that the fire insurance analogy still holds. Let's say my neighbor's house burns down. That could lower my property values. But I'm still not allowed to take out a fire insurance policy on his home, because of the perverse incentive. It sets up a situation where I would benefit if something bad happened to him. Same with taking out life insurance policies on other people.

Since: Apr 07

Brentwood, TN

#6 Oct 6, 2009
TTTIN wrote:
<quoted text>
By "necessary" you make it sound like the business will die if it doesn't do this. Most businesses that do this are already making windfall profits and have highly paid executives. They can definitely affoard to forgo these kinds of policies.
I can kind of understand for key employees like highly-paid professions and important executives. The article even points out this difference. But the only point in having these policies on rank-and-file employees is to make a profit. You're not going to go out of business because a rank-and-file employee dies. These policies have created a situation where it becomes more profitable for people to die than live. They should at least be limited to recovering costs from these policies, and not wind up with more money than they would have if the employee didn't die. The way these policies are set up death makes profit. In fact some companies had reports saying only 60% of the expected number of people died in a year negatively because they wanted more people to die because that meant more money.
I got a better idea. Let businesses take out a general policy on incidents that threaten to put it out of business, which would cover it if some people died but only if the resulting expenses pushed it over that edge. It could also cover other unforeseeable incidents. That way its not based on people dying its based on if people dying (or anything else that happens) almost destroys the company. If companies can have that kind of policy instead(and don't tell me there's no market for it. I'd be surprised if this hasn't been invented yet) then there's no legitimate reason for any of them to keep carrying life insurance policies on people which could lead to perverse incentives(by which I don't mean murder conspiracies just that companies notice when they relax safety precautions more people die and they get more money which becomes a feedback loop so the company starts making things unsafe on purpose).
Do you have any idea how much money it costs a company to find, hire and train a person to replace an employee who dies? Even a line worker? For years I worked a line and I watched the company spend upwards of a million dollars trying to find, hire and train people. There is damage to the machinery as the new employee makes mistakes trying to learn how to operate the machines. Then there is lost productivity as well as having to train upwards of 10 to 20 people before they are able to find that one person who is able to do the job. It is a lot like dating. You have to go through a lot of jerks before you are able to find that keeper. Noe imagine if every jerk you date costs you $100,000.00 or more.
TTTIN

East Lansing, MI

#7 Oct 6, 2009
The only problem I have with these life insurance policies is that it's geared towards a specific person. Like I said this problem could easily be solved to the satisfaction of both the businesses and the public. Instead of life insurance, just have business insurance that wouldn't specific mention people but would pay if the business was about to go out of business for any reason whatsoever. That would cover situations where someone dying really threatens the company.

Since: Apr 07

Brentwood, TN

#8 Oct 7, 2009
TTTIN wrote:
The only problem I have with these life insurance policies is that it's geared towards a specific person. Like I said this problem could easily be solved to the satisfaction of both the businesses and the public. Instead of life insurance, just have business insurance that wouldn't specific mention people but would pay if the business was about to go out of business for any reason whatsoever. That would cover situations where someone dying really threatens the company.
They already have that only it does not cover additional costs due to employee death. That must be covered separately.
TTTIN

East Lansing, MI

#9 Oct 7, 2009
Jim Hayden wrote:
<quoted text>
They already have that only it does not cover additional costs due to employee death. That must be covered separately.
Why? Is there some law saying business insurance that otherwise covers any event that threatens to throw a business out of business must have a clause excluding employee death? Or is it just that the market hasn't produced it?

I bet if taking out life insurance policies on other people was made illegal you'd see a market for general business insurance that does not exclude those cases come up very quickly. Of course it would only apply if the business was actually in danger of going out of business so no more collecting insurance on people who die no matter what, but if you're not going to go out of business because of it but instead take a survivable hit then you can't really call it necessary like you did in your first post, just convenient.
TTTIN

East Lansing, MI

#10 Oct 7, 2009
Sorry its a little wordy. Part of it could be taken in two different ways so to clarify "no more collecting insurance on people who die no matter what" means you wouldn't be able to have policies that automatically pay you if someone dies, just policies that would include it if someone died but only if it threatens your businesses' existance and only if it also includes any other unforseen(or somewhat foreseen but not with enough time to prepare) event.

Since: Apr 07

Brentwood, TN

#11 Oct 7, 2009
TTTIN wrote:
Sorry its a little wordy. Part of it could be taken in two different ways so to clarify "no more collecting insurance on people who die no matter what" means you wouldn't be able to have policies that automatically pay you if someone dies, just policies that would include it if someone died but only if it threatens your businesses' existance and only if it also includes any other unforseen(or somewhat foreseen but not with enough time to prepare) event.
Most companies survive on a 30% profit margin that does not leave a whole lot of room for things like training and machine repairs when an employee tears up a machine and depending on the machine and the amount of damage caused it can add up over $200,000.00 real fast.

Therefore there is a need for this kink of coverage. Oh yea just so you know I have an insurance policy out on my wife for when she dies.
TTTIN

East Lansing, MI

#12 Oct 7, 2009
Jim Hayden wrote:
<quoted text>
Most companies survive on a 30% profit margin that does not leave a whole lot of room for things like training and machine repairs when an employee tears up a machine and depending on the machine and the amount of damage caused it can add up over $200,000.00 real fast.
Therefore there is a need for this kink of coverage. Oh yea just so you know I have an insurance policy out on my wife for when she dies.
That would be costs related to someone dying, which is an unforeseen event.

Don't see how simply removing the exception in general business insurance wouldn't solve the problem.

Otherwise how do we deal with the perverse incentive? Soon we might have companies killing employees to make money.
TTTIN

East Lansing, MI

#13 Oct 7, 2009
As for your wife that can easily be flipped that is your life's policy can pay for you since life insurance policies for an individual are about paying for the people left behind.

Since: Apr 07

Brentwood, TN

#14 Oct 7, 2009
TTTIN wrote:
As for your wife that can easily be flipped that is your life's policy can pay for you since life insurance policies for an individual are about paying for the people left behind.
So what's the difference?

My relations ship with my wife and my relationship with the company I work for. We both suffer a monetary as well as an emotional loss.

Yea I know a large corporation is a heartless monster RIGHT???

Every company, corporation and business is made up of the people who work there. It is not a heartless monster it is people working together toward a single goal. People develop very close ties with other people they work with. I have heard several psychologists claim that in a lot of cases people develop a closer relationship with their coworkers than they do with their wives and their children.

When the human aspect is added in. well there are relationships that are deeply affected when a person dies unexpectedly. These human aspects must be dealt with by a professional and that takes a lot of money as well.

So yea I can understand a need for a company to take out an Insurance policy against their employees. The only question is how much is excessive? That can only be determined on an individual case by case basis.
TTTIN

East Lansing, MI

#15 Oct 7, 2009
Jim Hayden wrote:
<quoted text>
So what's the difference?
My relations ship with my wife and my relationship with the company I work for. We both suffer a monetary as well as an emotional loss.
Yea I know a large corporation is a heartless monster RIGHT???
Every company, corporation and business is made up of the people who work there. It is not a heartless monster it is people working together toward a single goal. People develop very close ties with other people they work with. I have heard several psychologists claim that in a lot of cases people develop a closer relationship with their coworkers than they do with their wives and their children.
When the human aspect is added in. well there are relationships that are deeply affected when a person dies unexpectedly. These human aspects must be dealt with by a professional and that takes a lot of money as well.
So yea I can understand a need for a company to take out an Insurance policy against their employees. The only question is how much is excessive? That can only be determined on an individual case by case basis.
So why can't a simple business insurance policy work if the life insurance exception was lifted? Certainly that would be preferable since it avoids perverse incentives.

This almost sounds like this is written by a corporation. Yes human relationships are formed in corporations but the people who actually run it i.e. make the decisions at the top and most importantly the decision to take out insurance on people's lives don't know most of the people they take insurance out on personally so it's very different.

Since: Apr 07

Brentwood, TN

#16 Oct 8, 2009
TTTIN wrote:
<quoted text>
So why can't a simple business insurance policy work if the life insurance exception was lifted? Certainly that would be preferable since it avoids perverse incentives.
This almost sounds like this is written by a corporation. Yes human relationships are formed in corporations but the people who actually run it i.e. make the decisions at the top and most importantly the decision to take out insurance on people's lives don't know most of the people they take insurance out on personally so it's very different.
Do you not realize that the majority of companies insure all of their employees that includes their CEOs and Board Members as well?
TTTIN

East Lansing, MI

#17 Oct 8, 2009
Jim Hayden wrote:
<quoted text>
Do you not realize that the majority of companies insure all of their employees that includes their CEOs and Board Members as well?
You're still avoiding my question.

What would be wrong with just including these incidents in general business insurance(reconfigured according to my idea above)? Is it because the company would not be guaranteed payment but instead would only get it if the expenses amounted to a threat of its existence? Is that really so important that we have to jeopardized lives over it? I think as long as the company is insured against failing because of expenses from too many people dying that should be enough.

Since: Apr 07

Brentwood, TN

#18 Oct 9, 2009
TTTIN wrote:
<quoted text>
You're still avoiding my question.
What would be wrong with just including these incidents in general business insurance(reconfigured according to my idea above)? Is it because the company would not be guaranteed payment but instead would only get it if the expenses amounted to a threat of its existence? Is that really so important that we have to jeopardized lives over it? I think as long as the company is insured against failing because of expenses from too many people dying that should be enough.
No I didn't. What you are proposing would be too expensive.
TTTIN

East Lansing, MI

#19 Oct 9, 2009
Jim Hayden wrote:
<quoted text>
No I didn't. What you are proposing would be too expensive.
How so?
TTTIN

East Lansing, MI

#20 Oct 9, 2009
And still no you hadn't answered my question up until you said what I was proposing would be too expensive.

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