My Twitter feed brought me an interesting piece by Christian Britschgi at Reason’s Hit & Run blog. In it, he lambasts this Washington Post op-ed decrying what they portray as the rampant abuse of life insurance policies by individuals who insure children only to then kill them and collect the insurance benefits. WaPo goes on to call for stricter regulations, naturally, to put a stop to this abuse.
Britschgi adeptly points out the self-refuting assertions in the WaPo piece–particularly that in each case cited either a) the victim wasn’t a child (not that adults’ lives don’t count, but it doesn’t comport with the drama of the headline), and/or b) the killer had already committed fraud (i.e., violated existing laws and regulations) in the process of buying the life insurance policy and then didn’t receive the payment because they committed further “fraud” by killing the insured. He also highlights that there’s nothing very ‘rampant’ about this kind of fraudulent behavior.
These articles reminded me of a conversation in one of my classes just a few weeks ago–and one I posted on four years ago here. Namely, the idea that life insurance is basically a bet that the insured person is going to die in the next year–and that when you lose the bet (i.e., the person doesn’t die), you pay up again for the next year.
This is a rather disturbing perspective for (apparently only an overwhelming majority of, but not all) parents who consider taking out life insurance policies on their children. After all, how many parents would admit to gambling on the prospect that their kid will die in the next year? And yet, that is exactly what they do when they buy that insurance policy. (Yes, I know; there are other reasons to insure children, as I discussed in that earlier post…but the point remains.)
In Vegas, bets don’t get paid if the bettor is found to rig the game. Counting cards, loading die, rigging jackpot machines, etc. And the house has a strong incentive to monitor betting behavior to weed out cheaters. As the Reason blog shows, the same is true for life insurance companies.