Some Ethical Issues in Joint Life Insurance
Abstract: One of the most common kinds of insurance, joint life insurance assures other partners in the plan compensation once the insured passes away. This kind of policy provides extra liquidity to the partners’ cash flow. However, it could possibly trigger malicious moves to harm others if the insurance policy reaches its maturity date without the death of any member of the insured party. This paper starts by examining the broad topic of life insurance and the market demand. There are ethical issues in providing joint life insurance. These are shown through a case study of tontines in the last section. Finally, there are some suggestions and modifications to improve mutual life insurance products.
Part I: Introduction to life insurance
The concept of life insurance existed extensively in areas such as China and Babylon. Throughout time, insurance has evolved, but until the early 18th century, a British company called the Amicable Society for a Perpetual Assurance Office formally established all insurance policies. The insurance market was prosperous during World War I but experienced a downturn during the Great Depression. After the recovery, the insurance market continued to develop in the U.S and U.K. and expanded to Europe. In the 21st century, life insurance is one of the biggest branches in the insurance market. It can easily be purchased in banks, investment banks and insurance companies.
- What is Joint life insurance?
Joint life insurance covers multiple lives with covenantal compensations once the insurance conditions have been met. These conditions might vary slightly among the types of joint life insurance in the market.
In general there are three types of joint life insurance products: 1) First-to-die insurance; 2) Last-to-die insurance; and 3) survivorship insurance. First-to-die insurance, the most common form of joint life insurance, pays upon the first death of the insured group. Similarly, last-to-die insurance pays out when the last insured person in the contract is dead. In contrast, the survivorship insurance pays for the survival of all participants at the end of the policy term. Joint life insurance is usually purchased by couples or business partners to secure their financial liquidity or that of their beneficiaries upon their deaths.
