Catalysts for Clarification: Modern Twists on the Insurable Interest Requirement for Life Insurance

Abstract:     
The long dormant insurable interest doctrine is being revisited as banks and other funds purchase life insurance policies in increasing numbers. Some industry commentators have raised objections, accusing Wall Street of perpetrating schemes that amount to impermissible gambling on the lives, and deaths, of others. In response, Wall Street financiers have insisted that they are committed to complying with state insurable interest statutes and that their efforts at building a secondary market for life insurance policies is expanding consumer options and eliminating the longstanding monopsony of the insurance companies. A workable compromise between the insurance industry and Wall Street positions that will modernize the insurable interest doctrine must simultaneously protect the free-assignability of life insurance policies and avoid a rekindling of the long-despised practice of gambling on lives. Development of such a proposal requires comprehensive examinations of the history of the insurable interest doctrine, the modern context within which it is being applied, and the primary proposals to modernize the doctrine that have been offered to date.

Number of Pages in PDF File: 46

Keywords: Insurable Interest Doctrine, Life Insurance Assignment, Life Insurance Policy

JEL Classification: K10, K20, K30, K34, G21, G22

Accepted Paper Series