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Perry Embroiled in Life Insurance Scam

Presidential hopeful Governor Rick Perry of Texas is under attack from the left and the right for attempting to profit from the deaths of his state's retired teachers.

WHAT IS DEATH SPECULATING?

The idea behind death speculating is that the policyholder will get a large death payout when the subject of the policy dies. The beneficiaries on the policy are investors.
Sometimes one person will take out the policy, then sell it to another party for a profit. By buying, selling, and trading policies on a third party's life, people profit from death.

So how does it work in practice?

A person without insurance is offered a loan to purchase a policy. The company supplying the loan pays the premiums for a specified period. In exchange, the subject of the policy agrees to sign over the majority of their death benefit to the company.

For example, an investor might agree to provide funds for a $5 million policy. At some point, the death benefit is signed over to the investor, who will then give the subject of the policy some money in exchange. When the subject dies, the investors collect the $5 million.

Technically speaking, anybody can do this. However, most people doing death speculation are large companies, such as Goldman Sachs, Bear Sterns, and Walmart.
Right now this practice is not illegal, though state governments and the federal government may have to move towards regulating it, as they are pressured by concerned citizens and insurance companies (who stand to lose quite a bit of money).

Legal, however, is not necessarily ethical. Would you want someone out there holding the policy waiting to profit on your death? Insurance exists to make a family's way of life more stable and secure, which is good for society as a whole. Of course, insurance companies already stand to profit, so you could ask what is wrong with another group getting in on the action?

IS RICK PERRY PROFITING FROM TEACHERS' DEATHS?

In 2003, Governor Rick Perry's office approached Texas's retired teachers with an offer to go in on some death prospecting. The other partner in the deal was UBS, a collosus of a bank from Switzerland. UBS would compensate Texas for the trouble of convincing the state's retired teachers to authorize UBS to buy life insurance policies on the retirees. The people on Wall Street would get paid big benefits when the retirees died and Texas would get a cut of the profit as well.

What would the families of the teachers get?

You guesssed it! Nothing.

There is no question that Rick Perry's administration was actively involved. In fact, all the evidence suggests that it was their idea.
So was this illegal? Hardly. Maybe a bit dirty and unethical, and maybe it leaves a bad taste in the mouth, but Perry broke no laws.

However, the reality of the way Perry acted as governor might rub conservative supporters the wrong way. Perry campaigns on the idea of minimal government, and as president, he would have voters believe, he would keep the government out of their lives.

Maybe he would keep government out of their lives, but not life insurance. And he certainly put at least a finger in citizen's deaths.

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