Sound familiar?
Then there is the dirty little secret of life insurance sellers: the real profit gravy comes from the calculated percentage of insured who, for a variety of reasons "mostly budgetary distress due to loss of job or other reasons for an inability to continue paying the premiums "let these policies lapse. As Wall Street securitization of what would otherwise be abandoned premiums grows, the drop in profits from abandoned and cashed in early policies could severely impact the life insurance industry, resulting in more expensive premiums overall.
And, of course, the new bubble of death is inflating in ignorance or simple disregard of life insurance securitization fraud of recent vintage. American Benefits Services, Inc., offered investors in Texas and other states a 42 percent rate of return, with 15 percent guaranteed. Over 3,000 people invested $117 million. Investor funds collected by American Benefits were forwarded to another viatical (death futures) settlement company, Financial Federated Title & Trust, which spent only $6 million to buy interests in actual life insurance policies. Regulators say the rest was diverted for the personal benefit of company organizers, including the purchase of a helicopter, boats, luxury cars (including four Aston Martins), luxury homes and large salaries. Fraud and investigations of alleged fraud in viaticals have happened in Vermont, Ohio, Maryland and other states. Source: http://www.quatloos.com/viaticals.htm
In 2005, a fund manager, the Shepherds Select fund, that specialized in viaticals, collapsed. The Shepherds Select fund invested mainly in fractions of life-insurance policies bought from elderly or dying people by Florida-based firm Mutual Benefit Corporation, which went into receivership in May 2005. Apparently, the insured hadn't died quick enough or the fund misrepresented risk to its investors. Source: Timesonline
In a July 19, 2007 article for Forbes.com, Peter Katt wrote, "Increasingly, though, this market is evolving into transactions where the main purpose is to charge exorbitant fees and commissions. Life insurers are also going after the wealthy elderly, convincing them to rent their high net worths and their lives to become insured for the sole purpose of then selling the life insurance policies. Katt also warned of the privacy of the insured being violated for higher commissions: "I have had three experiences of individual investors being sent complete information about the insured, insurance company and policy they have invested in or bought. In each situation, the settlement company that sold this investment denies it ever give out the names of insureds. They have lied to me. If sellers of life insurance policies knew their policy could end up in Tony Soprano's IRA, they would be more cautious about whom they sell to.
Certainly if Tony was losing money on a John Smith, who obstinately refused to die for the sake of Tony's profolio, the temptation to....
And that brings this writer to the darkest concern of what I will conclude to be the coming Death Bubble: the eventual collusion of the Health Insurance Industry and the viatical settlement companies to share data and cooperate to limit medical care to those whose lives have been securitized for profit, and resist all the more vigorously any governmental actions to reduce health care costs or provide a public health care option that would make it unnecessary for the terminally ill to sell their life insurance at the risk of collapsing the life insurance securities market.
And, by now, the world knows what happens when the bubble schemes of Wall Street collapse.
The explosion of the ballooning Death Bubble could truly destroy the world.
Some current state laws limiting viaticals can be found at these links:
Kansas: http://www.ksinsurance.org/gpa/news/2008/STOLI_signing_042108.pdf
Montana: http://www.sao.mt.gov/news/20090127Viatical.html
California: http://articles.latimes.com/2000/oct/27/business/fi-42781(Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).