Gambling Lives

Came across this from a link on twitter:

Right now, your company could have a life insurance policy on you that you know nothing about. When you die — perhaps years after you leave your employer — the tax-free proceeds from this policy wouldnt go to your family. The money would go to the company.
…Hundreds of companies — including Dow Chemical, Procter & Gamble, Wal-Mart, Walt Disney and Winn-Dixie — have purchased this insurance on more than 6 million rank-and-file workers…. These policies, nicknamed dead janitors or dead peasants insurance, soared in popularity after many states cleared the way for them in the 1980s.

The article takes a rather strong position against the practice. Obviously, the fact that a company is essentially making money off an employee’s death without doing anything to help his/her family(besides whatever is already in its labour contracts/policies, that is) is a little repugnant. The prime motive is not, apparently, “insurance” against losses caused by key personnel leaving but purely profit, since these are basically tax-free returns:

Sales of the policies came to a virtual standstill in September 2003, according to the insurer trade group ACLI, when the Senate Finance Committee approved legislation that would have taxed payouts made to companies if the employee had left more than a year earlier. That indicates that most policies aren’t being sold to protect companies financially against the loss of key current employees.

However, try as I might, I can’t come up with any reason to condemn this from a libertarian perspective. What it amounts to is two entities-the company and the insurer- making a contractual agreement based on some uncertain event. You can call this gambling (which again I find nothing wrong with, so I shouldn’t need to justify that at all), but it works exactly like other perfectly legal, even encouraged contracts (i.e. insurance in pretty much any other situation). As long as the company does not work the employee to death- a factor that is mentioned in the article, but surely there are other laws to take care of that explicitly, not just as it relates to insurance- what’s the harm? I agree that they should probably tax the income earned, though, given that society needs taxes to function and that this behaviour is not something we want to subsidize. The fact that that would apparently wipe out the market is not something I would necessarily lose sleep over, since I don’t see any other justification to not tax it.

OK. Since that is almost the same thing as condemning it anyway, I have no idea why I wrote this post.


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