Life Settlements Flourish on Wall Street
Die on Time or We May Have to Kill You
April 7, 2008
Fox Business reported Friday that “life settlements,” a way of allowing terminally ill patients — often those suffering from AIDS — to sell their life insurance policy for cash before they die so they can use it to pay medical bills — began in the 1980’s and have morphed into a financial product that is swapped and traded like bundled Wall Street mortgages. That means that the policies are owned by investors waiting for the insured person to die and the policy to pay off. The investor puts up cash for the premiums and bets that the person will die within anticipated actuarial deadlines and that there’ll be a profitable return on the investment. If you don’t die on time, the investor can’t make money. And that can result in deadly consequences.
“I enjoy purchasing life insurance policies from old folks, especially wealthy ones who don’t really need the insurance anymore, and giving them cash, usually a percentage of what their family would get at their death, and then packaging a bunch of them together and selling them to Wall Street investors,” said Jim Reaper, a speculator and distant relative of a scythe carrier named Grim, a happy-go-lucky sprite who also enjoys harvesting souls for fun and profit. “The old folks get cash for that one last spurge and the investors cash-in because unlike markets that are uncertain, you can count on people to die. Everybody wins. Unless the old and the sick live too long. But that can be managed if it has to be. You can get anything done if the price is right.”
Some people are uncomfortable with the idea that speculators now own a financial product that generates the most profit when a stranger dies sooner than later. “What started out as a nice idea — a respected entity giving a terminally ill person money they need now in exchange for that entity becoming the beneficiary of the life insurance payout at death — has now been converted into a gambling casino placing bets on folks longevity and paying out the most if you die early,” said Bob Smith, a regular guy from Normal, Illinois, a place where common sense still clings to reality in some parts of town. “Think of the windfall an investor gets if everyone in his Life Settlements portfolio suddenly dies unexpectedly. The premature death of hundreds of people becomes the investors dream. Is that sick or what?”
Fox Business reported that as life settlements have grown more popular and more profitable, aggressive promoters have begun trolling senior citizen complexes in search of clients, namely elderly residents who might be convinced to purchase life insurance, and then to sell their policies for a one-time cash payout. Ostensibly, everyone wins. The policy buyer gets a nice windfall; the promoter sells the policy to investors at a profit; and the investor cashes in when the person named on the policy dies. The market for these “securities” is projected to grow to $20 billion by the end of 2008. But with new medical treatments investors in life settlements have begun to fear that the insured whose policies they’ve purchased will live long lives and thus cut into their profits.
“The down side of mortgages is that people default. The downside on these life settlements is that people live too damn long,” said attorney R. Mark Keenan of the New York firm Anderson Kill & Olick, who has written extensively on the topic. “Should strangers be allowed to make investments in the lives of others?”
Since investors in life settlements get their payoff when an insured person dies, it’s only a matter of time before a policy holder is killed so that investors can reap their profits sooner. “These people are running around with targets on their backs. The first case where someone gets killed is going to reverberate around the world,” said Brad Tibbitts, director of the life and property casualty division for the Utah Department of Insurance.
But like everything else, there are always trade-offs. “I’ve sold fifteen life insurance policies on myself and can finally retire comfortably whenever I decide to,” said John Doe, a crafty old bastard willing to sell anything for a buck, but who has also changed his name at least fifteen times so nobody can identify him and track him down. “You can make money trading your life to folks but you’ve got to be careful. I should know, I’m a part-time hitman and life settlement dealer, and I’ve been paying hospice care workers to ‘forget’ patients med’s and mix them up and shit like that so I can shorten the life spans of people who need to be dead. Most of these folks will die soon anyway so there’s nothing suspicious about them going sooner than later. It’s no big deal. I’ve been tracking psych wards for suicidal folks too. I can turn big bucks with them because their young and cheap to insure and easy to take out fast. Excellent returns buddy. Want to buy a few life settlement packages? It’ll help you out of the mortgage fix you’re in.”
In other news, Bloomberg reported last week that inflation in China is rising so fast that cemeteries are now charging 30,000 yuan ($4,273) per square meter for a standard plot, compared with an average of 20,000 yuan per square meter for an apartment in the city center. No word on whether China plans to start packaging and selling life settlement packages on Wall Street to finance burials, or just start renting less expensive apartments and stashing the dead bodies there.
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