Comments on: Death Bonds http://marketingoptions.com/death-bonds/ and Steve Carlson....Blogging Together as a Team Wed, 18 Nov 2009 01:38:32 -0700 http://wordpress.org/?v=2.8.5 hourly 1 By: surfboy http://marketingoptions.com/death-bonds/comment-page-1/#comment-8 surfboy Wed, 18 Nov 2009 01:38:32 +0000 http://marketingoptions.com/?p=260#comment-8 Regulatory constraints aside, there are two issues that give rise to the concept of selling your life policy, one pro and one con. On one hand, the “smell test” argument put forth by the insurance industry lost its luster when they twisted life insurance from a protection vehicle for premature death to a “queasy” investment vehicle with the advent of Universal Life. Life policies are now rightfully considered an asset with a variable equity value depending on the point of measure, with all the rights of any asset ownership, including disposition. The fact that law and regulation hasn’t caught up with the current state of affairs is mute in the realm of ethics. Stated positions from the insurance industry would lend more credibility if they used actuarial and pricing arguments as a vote against. Under current pricing practices, if everyone kept their policy to the end, the pricing would be inadequate. This is exactly what would happen with Death Bonds. On the other hand, because of its very nature, life insurance is a complex, intangible instrument as a contract document and its application as a financial tool. Life insurance, on the surface, its simple, you die and the insurance pays a benefit. Similarly a mortgage most people understand. Bank lends you money, charges you a price and you pay it back over time. Then mortgages were bundled into mortgaged backed securities [MBS]. It became a complex financial instrument, which few understood with any clarity, but MBS promised returns too good to pass up. As the demand for MBS increased, the shenanigans for creating more mortgages to create MBS began in earnest. The rest is history. The temptation to play the same game with death bonds is no less. The sweater the return the more creative the usury tactics become in fulfilling and delivering on the demand. The sellers, in positions of perhaps weakness, agree to dispense, when upon sound reflection, may not do so. The "bundeler" of the death bond, might be tempted to over state or even fabricate performance / return, as has been seen in the viatical industry in the US. What can easily happen is two victims can emerge with death bonds; the seller of the risk and the investor. The Seller is not equipped to properly measure the value of the asset he is about to sell and the investor doesn’t have the tools to independently measure the risk he is buying. Hence, the need for a regulatory framework. is, in my opinion, in the public interest. Remember there were some very sophisticated and intelligent people that were “duped’ by Bernie Madoff. Regulatory constraints aside, there are two issues that give rise to the concept of selling your life policy, one pro and one con. On one hand, the “smell test” argument put forth by the insurance industry lost its luster when they twisted life insurance from a protection vehicle for premature death to a “queasy” investment vehicle with the advent of Universal Life. Life policies are now rightfully considered an asset with a variable equity value depending on the point of measure, with all the rights of any asset ownership, including disposition. The fact that law and regulation hasn’t caught up with the current state of affairs is mute in the realm of ethics. Stated positions from the insurance industry would lend more credibility if they used actuarial and pricing arguments as a vote against. Under current pricing practices, if everyone kept their policy to the end, the pricing would be inadequate. This is exactly what would happen with Death Bonds.

On the other hand, because of its very nature, life insurance is a complex, intangible instrument as a contract document and its application as a financial tool. Life insurance, on the surface, its simple, you die and the insurance pays a benefit. Similarly a mortgage most people understand. Bank lends you money, charges you a price and you pay it back over time. Then mortgages were bundled into mortgaged backed securities [MBS]. It became a complex financial instrument, which few understood with any clarity, but MBS promised returns too good to pass up. As the demand for MBS increased, the shenanigans for creating more mortgages to create MBS began in earnest. The rest is history.
The temptation to play the same game with death bonds is no less. The sweater the return the more creative the usury tactics become in fulfilling and delivering on the demand. The sellers, in positions of perhaps weakness, agree to dispense, when upon sound reflection, may not do so. The “bundeler” of the death bond, might be tempted to over state or even fabricate performance / return, as has been seen in the viatical industry in the US. What can easily happen is two victims can emerge with death bonds; the seller of the risk and the investor. The Seller is not equipped to properly measure the value of the asset he is about to sell and the investor doesn’t have the tools to independently measure the risk he is buying. Hence, the need for a regulatory framework. is, in my opinion, in the public interest. Remember there were some very sophisticated and intelligent people that were “duped’ by Bernie Madoff.

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