The Universe of Discourse

Wed, 15 Aug 2012

The weird ethics of life insurance
Many life insurance policies, including my own, include a clause that says that they will not pay out in case of suicide. This not only reduces the risk to the insurance company, it also removes an important conflict of interest from the client. I own a life insurance policy, and I am glad that I do not have this conflict of interest, which, as I suffer from chronic depression, would only add to my difficulties.

Without this clause, the insurance company might find itself in the business of enabling suicide, or even of encouraging people to commit suicide. Completely aside from any legal or financial problems this would cause for them, it is a totally immoral position to be in, and it is entirely creditable that they should try to avoid it.

But enforcement of suicide clauses raises some problems. The insurance company must investigate possible suicides, and enforce the suicide clauses, or else they have no value. So the company pays investigators to look into claims that might be suicides, and if their investigators determine that a death was due to suicide, the company must refuse to pay out. I will repeat that: the insurance company has a moral obligation to refuse to pay out if, in their best judgment, the death was due to suicide. Otherwise they are neglecting their duty and enabling suicide.

But the company's investigators will not always be correct. Even if their judgments are made entirely in good faith, they will still sometimes judge a death to be suicide when it wasn't. Then the decedent's grieving family will be denied the life insurance benefits to which they are actually entitled.

So here we have a situation in which even if everyone does exactly what they should be doing, and behaves in the most above-board and ethical manner possible, someone will inevitably end up getting horribly screwed.

[ Addendum 20120816: It has been brought to my attention that this post constains significant omissions and major factual errors. I will investigate further and try to post a correction. ]

Addendum 20220422: I never got around to the research, but the short summary is, the suicide determination is not made by the insurance company, but by the county coroner, who is independent of the insurer. This does point the way to a possible exploit, that the insurer could bribe or otherwise suborn the coroner. But this sort of exploit is present in all systems. My original point, that the hypothetical insurance company investigators would have a conflict of interest, has been completely addressed. ]

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