This article is talking about how the current state of our economy and the recent past economic downturn has effected the amount of profit Wall Street is earning. However, they are planning on purchasing the life settlements mentioned in the article and packaging them together into bonds and selling those bonds to investors that will eventually receive payouts when the elderly or ill person who originally sold the settlement passes away. I am not sure if I agree that this will be a successful way of gaining profit because there will be a high risk if the ill or elderly person who sold the insurance outlives their life expectancy, because the way this plan works is the sooner the person dies, the higher return the holder will get on the bond.
Also, I agree that it will be difficult for customers in the life insurance market, too, because, as stated in the article, most people let their life insurance lapse before they die, which would make the plan for Wall Street impossible.
Along with this, they are worried that it will hurt insurance companies. I agree with this and believe that it will because when people decide to go through with Wall Street's new plan, then people keep their policies longer, which means more payout for the insurance companies and less money for the company.
All in all, I do not agree with the new plan. I think it will end up hurting insurance companies and possibly those who decide to purchase the bonds, because of the risk out outliving the insurance holder's life expectancy.
1 comment:
I don't think this is a good idea, either. Following the mortgage crisis, I would expect security to be a greater priority on Wall Street. However, this makes it seem as though profit is the primary motivator, regardless of the risks--which in this case are not even known yet.
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