Dying For A Profit: Inside the Betting Markets of Life and Death

When we think of financial markets, the image that often comes to mind is that of sharp suited men closing deals for obscure financial instruments over the phone. Perhaps the cacophony of voices clammering out on a stock exchange floor is a more stereotypical portrayal. Whatever the idea, these transactions all seem to be far removed from the real world, either too abstract or too complicated to have any real relevance to our own lives. But there is one sector of financial industry that has an inextricable connection to something that we all know of, something that we will all encounter in our lives. That is, the market of death.

Of course, that’s not technically what it’s called. Originally, the companies who engaged in this activity were known as ‘viaticals’. The concept is simple, and began to gain prominence around the 1980s and 90s in the U.S. A. Companies would buy the life insurance policy of a person with a terminal illness (around this time those with AIDS were often selected) for a discount, say half the pay-out price of the insurance. They take up responsibility for paying the annual premiums and in return, once the person dies, they claim the pay-out.

The potential for profit was astounding, with investors making big re- turns, and viatical companies’ absurd commissions, as they bought and sold these financial products. In the words of William Scott Page, president of a viatical known as ‘The Life-line Program’: “There have been some phenomenal returns, and there have been some horror stories where people live longer.”

Yes. He actually said that. Viatical companies and their investors know that their profits depend on the deaths of those who have sold their life insurance, preferably as early as possible so that returns aren’t eaten up by the burdensome annual premium payments.

This fact is so abundantly clear, that whilst many were celebrating the discovery of antiretroviral drugs that extended the lives of AIDS patients, Dignity Partners, Inc., another viatical, found their stock price going from $14.50 to $1.38 before ending up bankrupt in 1996. Before going bankrupt, the firm said in a press release: “Although the medical developments announced at the AIDS conference are welcome news for many, if the treatments are effective in the long term, the company’s results will be adversely affected.”

But it doesn’t stop there – the rabbit hole goes deeper. After the lives of AIDS patients were extended, viaticals moved to buying the insurance policies of people with cancer, or other illnesses, with the head of the American viatical trade association proclaiming: “Compared to the number of people with AIDS, the number of people with cancer, severe cardiovascular diseases, and other terminal illnesses is huge”.

Around the turn of the century the viatical industry had a eureka moment: why not buy and sell the life insurance policies of any elderly person, not just those with terminal illnesses? And thus the ‘life settlements’ industry was formed, named differently in order to have a clean break from the corrupted image viaticals had. By the mid-2000s this market was positively booming, with demand so high that banks such as Credit Suisse or Deutsche Bank were literally paying the elderly to take out life insurance, which they then sold on to investors. This was known as ‘stranger originated life insurance’ or STOLI, with roughly $13bn worth of STOLI policies being created and sold in 2006.

Finally, a check was put on the industry with most states in America banning STOLIs by 2009. Of course, that didn’t stop life settlement companies; led by banks such as Gold- man Sachs or UBS, securitisation was the next milestone for the sector. Securitisation is the process by which banks bundle up many different financial products in one and sell them on together, a classic example being the subprime mortgage bonds filled with the mortgages of over- burdened homeowners that caused the 2008 crash.

The securitisation of life settlements is part and parcel of the industry today, with investors delighting in the fact that their investments are practically risk free. The reason? The bonds are designed to include elderly people with a wide range of diseases such as leukaemia, lung cancer, heart disease, breast cancer, diabetes, Alzheimer’s, as if the cure for one of these diseases is found, the price of the bond won’t plummet as there are plenty of other people who’ll still die relatively soon and yield a handsome profit for the investor. The obvious question regarding the rise of this market is this: is it ethical? Is it right to treat human life like a commodity? Some- thing which can be profited from?

The assumption underlying much of human rights theory is that human beings have a certain telos (purpose), be it to be social creatures or to utilise their reason to decide what’s best for them and then pursue it – hence why principles such as the right to a family life or democratic representation are held so core to us. Of course, the lives of human beings are often used as tools for the profit of others, just look at the betting industry, but there seems to be a world of difference between betting on the outcomes of how people live their lives, and betting on the very chance of them being alive in the first place. This seems to make a mockery of the purpose of human life, which under the ruthless market philosophy of these industries, is not happiness, fulfilment and enlightenment but to be betted on for the benefit of others, where long life is mourned and death celebrated.

Most life settlement companies would point to the annuity industry which also relies on mortality projections and stands to profit if clients die early. They would ask: if they aren’t immoral, why are we? Perhaps rather than assure us that their industry is indeed moral, we should take pause and wonder whether, in late stage capitalism, the denigration of human life is all around us, with the life settlement industry being only an acute example. Is it really respecting the human condition when the advertising industry is built around tricking our brains into doing things on the metric of profit for corporations, rather than our own wellbeing? When the wellbeing of workers is treated as an expense rather than a right? Perhaps it is through the particularly horrifying example of the viatical and life settlement industries that we can start to look at the philosophy behind our economy, and wonder whether we really like what we see.

Image credit – Alan Kotok