Talk about encouraging Bad Faith conduct.
A "viatical settlement" is defined in Wikipedia, the free encyclopedia, as "the sale of a life insurance policy by the policy owner before the policy matures." The policyholder gets a little more than the current cash surrender value while she or he is alive; the purchaser gets the right to the payoff and typically turns around and sells it to investors. In a viatical settlement purchase, the policyholder is usually near death. A "life settlement" according to Wikipedia is similar but involves policyholders who are likely to live awhile.
Reportedly, investors of other people's money are so hungry for profit opportunities that they are buying third parties' Life Insurance Policies. Actually, they are mainly buying the right to receive the payoff when the third parties die. In the meantime, the investors pay the Life Insurance Premiums. See also Jenny Anderson, "Back to Business/Wall Street Pursues Profit in Bundles of Life Insurance" (New York Times Online, Sunday, September 6, 2009).
This ghoulish bargain carries with it the clear incentive to shorten the amount of time that the investors have to pay the Premiums. That will reduce their expense and increase their all-important profit, hastening the day of their payoff. The opportunities for Unfair Dealing and Bad Faith are, and should be, apparent.
One State that is jumping into Regulation of these unholy arrangements is California. There, the California Assembly is considering a bill to regulate this industry, the chief product of which is money. See Marc Lifsher, "Insurance/Legislation Targets Those Who Bet on Death" (Los Angeles Times Online at latimes.com, Friday, October 9, 2009). Do not be overly heartened by this news, however. This is the second year that this legislation has been introduced in the California Assembly.
Old saying: "The journey of a thousand miles begins with a single step."
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