It can't be good for an investor to have a personal stake in other people dying
RITE & REASON:Human life is being monetised in a very crude way, writes JOE HUMPHREYS
IMAGINE IF a loved one of yours died and this triggered a payment to an investor who had been gambling on his or her premature death. How would you feel? This isn’t science fiction. It is the reality of the “life settlement” industry, a growing business which is testing the boundaries of financial ethics.
The practice involves acquiring life assurance policies and then trading them in the same way you would savings bonds. The only difference is profits are maximised if your bonds “mature” quickly – ie if the people in your life settlement portfolio die sooner than expected.
There is no suggestion of anything illegal about the industry. But is there something immoral? Michael J Sandel poses this question in his magnificent book What Money Can’t Buy, which explores how “market thinking and market relationships invade every human activity”.
He cites the life settlement business as just one example of the way in which the financial world is encroaching on morality. But what’s really interesting is our response to the booming industry – or rather the lack of it.
As Sandel points out, most people would regard betting on other people’s dying “as morally appalling. But from the standpoint of market reasoning, it’s not clear what is objectionable about it.”
There is something a little creepy perhaps about the idea of an investor in a “death fund” cheering with delight as each cheque comes through the post. There is a sense that human life is being monetised in a very crude way, and that this can’t really be good for society. There is also a sense that it can’t be good for the investor to have a personal stake in other people dying.
But how do you express these impressions in a society where value judgments are meant to be kept private? And what weight would they carry if the life settlement industry promised to create wealth and jobs in cash-strapped Ireland today?
Our inability to think about values outside of the purely economic has been badly exposed by the downturn. When it came to bailing out the banks, setting up Nama or any other major policy decision since September 2008, the criterion has simply been “if it works” financially then do it. The fact that there has never been a serious debate in this country about the ethics of operating as a corporate tax haven also speaks volumes.
What then, for example, if the Government announced tomorrow it wanted Ireland to become a world leader in the life settlement industry? Some of Ireland’s super-rich have already invested in the sector, and a number of international players have moved here due to “the tax advantages”, according to a lawyer for one now defunct firm trading in life settlements, otherwise known as “viaticals”.
A recent arrival is Global Insurance Settlements Funds (GISF) plc, incorporated in Ireland in September 2010 and open to any investor with a minimum of €100,000.
“Yield is determined by time not market forces, so it’s not a question of ‘if’ a return will be paid, but ‘when’ it will be paid,” the company notes cheerfully.
According to GISF, the industry is forecast to grow by $142 billion over the next 10 years. As the Economist reported in the wake of the economic crash, the trade has benefited perversely from the downturn by becoming “a magnet for those Wall Street alchemists who brought the world the joys of mortgage-backed securities and credit-default swaps”.
What’s important here, though, is not the specifics of the industry but the general rule that markets lead and our values tend to adapt to them.
If a businessman was to guarantee thousands of jobs tomorrow by turning Ireland into a world leader in online gambling, say, or lap-dancing, who would stand in his way? And how would you argue the case against?
Were you inclined to lean on the Bible for moral backbone, for example, you would find it had nothing to say directly about the ethics of “viaticals”. And good luck if your only moral reference point is a vague sense of what’s personally distasteful.
In a world where we have lost the tools to discuss values, norms are simply dictated by what the market decides.
Joe Humphreys is an Irish Times journalist