Regulation Not Prohibition: The Comparative Case Against the Insurable Interest Doctrine

American law requires an insurable interest—a pecuniary or affective stake in the subject of an insurance policy—as a predicate to properly obtaining insurance. In theory, the rule prevents both wagering on individual lives and moral hazard. In practice, the doctrine is avoided by complex insurance transaction structuring to effectuate both origination and transfers of insurance by individuals without an insurable interest. This paper argues that it is time to abandon the insurable interest doctrine. As both the English and Australian experiences indicate, elimination of the insurable interest doctrine will have little detrimental pecuniary effect on the insurance industry, while freeing consumers considerably. Indeed, New York comes to the brink of eliminating the doctrine in its recent decision in Kramer v. Phoenix Life Insurance Co. by sanctioning an immediate life insurance assignment procedure that in effect eliminates the need for an insurable interest in the assignee. However, Delaware, in PHL Variable Insurance Co. v. Price Dawe 2006 Insurance Trust and Lincoln National Life Insurance Co. v. Joseph Schlanger 2006 Insurance Trust, breathes new life into an old doctrine. Overall, though, adhering to an arcane doctrine that prevents the value of an insurance policy from being realized without extreme legal burden both hampers the market and harms consumers, as the benefits of such transactions are both lessened by transaction costs and accrue to only a select few individuals

Regulation Not Prohibition: The Comparative Case Against the Insurable Interest Doctrine

American law requires an insurable interest—a pecuniary or affective stake in the subject of an insurance policy—as a predicate to properly obtaining insurance. In theory, the rule prevents both wagering on individual lives and moral hazard. In practice, the doctrine is avoided by complex insurance transaction structuring to effectuate both origination and transfers of insurance by individuals without an insurable interest. This paper argues that it is time to abandon the insurable interest doctrine. As both the English and Australian experiences indicate, elimination of the insurable interest doctrine will have little detrimental pecuniary effect on the insurance industry, while freeing consumers considerably. Indeed, New York comes to the brink of eliminating the doctrine in its recent decision in Kramer v. Phoenix Life Insurance Co. by sanctioning an immediate life insurance assignment procedure that in effect eliminates the need for an insurable interest in the assignee. However, Delaware, in PHL Variable Insurance Co. v. Price Dawe 2006 Insurance Trust and Lincoln National Life Insurance Co. v. Joseph Schlanger 2006 Insurance Trust, breathes new life into an old doctrine. Overall, though, adhering to an arcane doctrine that prevents the value of an insurance policy from being realized without extreme legal burden both hampers the market and harms consumers, as the benefits of such transactions are both lessened by transaction costs and accrue to only a select few individuals

Deciding the sale of a life policy in the viatical market: Implications on individual welfare

In this paper, we present an economic model that allows a terminally ill policy-holder to decide whether or not to sell (part of) the policy in the viatical settlement market. The viatical settlement market emerged in the late 1980s in response to the AIDS epidemic. Nowadays it is part of the large US market in life settlements. The policies traded in the viatical market are those of terminally ill policyholders expected to die within the next two years. The model is discrete and considers only the next two periods (years), since this is the max- imum remaining lifetime of the policyholder. The decisor has an initial wealth and has to share it between his own consumption and the bequests left to his heirs. We rst introduce the expected utility function of our decisor and then use dynamic programming to deduce the strategy that gives higher utility (not selling/selling (part of) the policy at time zero/selling (part of) the policy at time one). The optima depends on the value of the viaticated policy and on some personal parameters of the individual. We nd an analitical expression for the optimal strategy and perform a sensitivity analysis.expected utility, viatical settlement, dynamic programming

Preparing for Large Natural Catastrophes: The current state and challenges of earthquake insurance in Japan

Global incidents of major natural catastrophes are becoming increasingly common in recent years. Seismological research has shown earthquake-prone Japan to be at particular risk from not only inland earthquakes, but also from repeat incidents of major earthquakes such as the Tokai, Tonankai, and Nankai earthquakes. In such an eventuality, earthquake insurance is expected to play a part in ex-post recovery efforts from the damage caused by these earthquakes, with the Japanese government developing special support programs. The previously low penetration rate of earthquake insurance in Japan, however, meant that it did not play a significant role in recovery efforts following the 1995 Great Hanshin-Awaji Earthquake. Despite recent progress in improving the system and an increasing awareness of the risks from earthquakes, the penetration rate of earthquake insurance in Japan remains at approximately 20%. In this study we discuss the current state and issues of earthquake insurance in Japan.Earthquake Insurance; natural catastrophes; Hanshin-Awaji Earthquake

Legal Issues with the Electronic Health Record

Introduction The purpose of this paper is to make readers aware of the legal issues in the electronic health record (EHR) and the risks involved so they can be prepared. It is also to help provide solution to those who are already dealing with the risks. The goal of this Project is to reach out to health care facilities who are about to embark on a new chapter in health care that we call, the EHR. Everyone should know the risks of a product before purchasing and that is what my research will show. Method I used The Journal of American Health Information Management Association as a primary search engine for articles. I also used PubMed which comprises more than 23 million citations for biomedical literature from MEDLINE, life science journals, and online books, and the Journal of American Medical Association. Results From doing the research, I have found that there are not as many legal issues within the electronic health record that most people think. According to an article in the Journal of American Medical Association, one research letter published online in Archives of Internal Medicine found that the rate of liability claims when EHRs were used was one-sixth the rate when EHRs were not used (Dolan, 2012). Conclusion The Electronic Health Record is still fairly new to some facilities so people may not know all the risks. People are misinformed about the risks of the EHR and this paper will hopefully educate readers on the topic. People will be surprised to learn the risks are not as many as they think, in fact, implementing and EHR may actually decrease the legal risks and improve patient care

Consolidation and Value Creation in the Insurance Industry: the Role of Governance

We examine the long run performance of M&A transactions in the property-liability insurance industry. We specifically investigate whether such transactions create value for the bidders' shareholders and assess how corporate governance mechanisms affect such performance. Our results show that M&A create value in the long run as buy and hold abnormal returns are positive and significant after three years. While tender offers appear to be more profitable than mergers, our evidence does not support the conjecture that domestic transactions create more value than cross border transactions. Furthermore, positive returns are significantly higher for frequent acquirers and in countries where investor protection is better. Internal corporate governance mechanisms are also significant determinants of the performance of bidders.Merger and acquisition, property-liability insurance, governance, value creation, performance of bidders

Long Live Life Settlements: The Current Status and Proposed Direction of the Life Settlement Market

The payment of life insurance policy benefits to the insured’s suriving spouse or child is something with which most people are both familiar and comfortable. However, when those benefits are instead paid to a third party investor who has no interest in the insured’s life, some people cry foul. Yet this is the basic premise of the secondary market for life insurance. In this market, insured individuals assign their policy benefits to an investor who agrees to pay the insured a lump sum of money in addition to assuming responsibility for the policy’s premiums. While the underlying concepts that support the secondary market for life insurance policies are not new, the young and imperfectly regulated market has been strained by an increase in supply and demand for these products. Because of the limited guidance within the market, fraud and uncertainty have pervaded many transactions. As a result, many validly settled policies may face challenges in the courts. In an effort to help stabilize and legitimize the secondary market, this Comment recommends coupling a strict judicial interpretation of the incontestability periods contained in many life insurance policies with a five year holding period on newly issued life insurance policies. This framework will help deter fraudulent transactions while promoting certainty among investors

Life settlements

Die vorliegende Magisterarbeit behandelt das Thema „Life Settlements“, wobei es sich hierbei um den Sekundärmarkt für Lebensversicherungen handelt. Es wird – soweit nicht explizit anderweitiges erwähnt wurde – lediglich auf den U.S.-amerikanischen Markt und dessen Gegebenheiten eingegangen. Zunächst einmal wird grundlegendes Wissen über Life Settlements vermittelt. Hierzu werden sowohl die involvierten Teilnehmergruppen als auch in vereinfachter Form der Transaktionsprozess beschrieben. Abgerundet wird dieser Überblick mit einer Liste der gehandelten Versicherungsarten sowie mit einem historischen Überblick zur Entwicklung des Marktes. Das zweite Kapitel beschreibt anschließend den Life Settlement-Prozess, die Wertschöpfungskette und die Marktteilnehmer auf eine detailliertere Art und Weise, wobei besonderes Augenmerk auf eine anschauliche und übersichtliche Darstellung unter Zuhilfenahme von Diagrammen gelegt wird. Kapitel 3 widmet sich nach den theoretischen ersten beiden Kapiteln der finanzmathematischen Seite. Hierbei werden Life Settlements nun als Finanzanlage betrachtet und dargestellt. Dies umfasst sowohl eine Analyse der Wertbestimmung von Lebensversicherungen und Life Settlements als auch ein Unterkapitel zur Preissetzung bei Life Settlements. In weiterer Folge wird zudem noch auf die Unkorreliertheit dieser Anlagenklasse mit den Finanzmärkten und mögliche Anlagestrategien eingegangen. Kapitel 4 diskutiert die zahlreichen Risiken für Käufer von Life Settlements. Sofern möglich, werden auch Lösungsansätze zu deren Bewältigung geliefert. Zu guter Letzt wird in Kapitel 5 auf die Entwicklung des Life Settlement-Marktes eingegangen, insbesondere auf die Entwicklung der letzten Jahre. Hierbei wird auch ein Erklärungsansatz gesucht, um die Stagnation einer Anlagenklasse zu erklären, die zwischen 2002 und 2007 exponentielles Wachstum verbuchen konnten. Außerdem wird auf die ethischen und moralischen Fragen eingegangen, welche dem Thema Life Settlements (vor allem in den Medien auf negative Art und Weise) anheften.This paper will discuss the U.S. American secondary market for life insurances, also known as the market for life settlements. The structure of this paper will be as follows. First, a very basic introduction to life settlements will be provided, explaining the fundamental structure of a life settlement process, the players involved, the life insurance types settled, and the terminology used. A short history lesson on the development of life settlements serves as a round-up. The second part will build on these basics to describe the transaction processes and involved parties for actually setting up a life settlement. A number of diagrams will help to develop an overview over the basic flows of the value chain. The third part will analyze life settlements as a financial asset. While the first two chapters are rather theoretical, this part will appear more mathematically. The valuation of a life insurance as well as the valuation of a life settlement will be explained in detail, followed by an insight on the pricing of life settlements. A view on the life settlements’ uncorrelated nature to the capital markets and possible investment strategies close this chapter. The fourth chapter will take a closer look at the plethora of risks involved for the buying-side in life settlement transactions, which mainly consists of brokers, providers, and investors. Whenever possible, solution proposals for these problems are given. The fifth chapter will finally take a look at the development of the life settlements market and, by doing so, will find a few answers to the sudden halt of a market which once had shown exponential growth. Afterwards, the ethical issues surrounding life settlements will be discussed

Bad Policy For Good Policies: Article 9\u27s Insurance Exclusion

Article 9 of the Uniform Commercial Code excludes from its scope any transfer of an interest in a life insurance policy. Thus, any lender whose security is a life insurance policy may not look to the UCC to determine her rights. This Article argues that the exclusion should be eliminated because it leaves insurance governed by antiquated and problematic law. Three specific problems are considered:non-UCC law does not have a satisfactory alternative to UCC perfection; non-UCC law is insufficient to prevent lenders from abusively taking more than their share of value from defaulted policies; and non-UCC law allows insurance companies to hinder securitization through the reservation problem.‖ The result is that Americans borrow $121 billion worth of policy loans, almost all of which comes without serious competition. Eliminating the life insurance exclusion will rationalize the law of lending in this area, and improve prospects for a secondary market

Insurance industry developments - 2008; Audit risk alerts

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