Question

In: Finance

In your opinion, is COLI unethical? If you think there is something unethical about the practice,...

  1. In your opinion, is COLI unethical? If you think there is something unethical about the practice, what is it? If you do not think so, why do you think so many people find it unethical?
  2. Suppose a company provided life insurance to each employee and also had a COLI policy on each employee; would that settle the fairness question?
  3. Does the fact that from a financial perspective some employees are worth more dead than alive represent a genuine conflict of interest?

Solutions

Expert Solution

There has been a lot of criticisms of Corporate ownership of life insurance and these are the insurance which are owned by the companies on the part of it's employees. In this kind of insurance, companies are responsible for making premium payments and they are also eligible for receiving the death benefits on their employees.

I think that there is something unethical related to this practice as the corporation is hiring the employees, they should be generally more bullish on their employees and they should not generally be taking advantage of their death policies, so it is better to call it an unethical policy due to payment of premium by the corporation in expectation that this can yield benefits when there will be any adverse event in case of employees health.

yes, that will settle the fairness question because such companies who have the life insurance policy as well as corporate ownership of life insurance policy that will help in reaching at a point of equilibrium because that will working for both the benefits of the corporation and the employees.

yes, it will reflect the conflict of interest because the company is always trying to hedge itself against the death of the employees and this will not be working in the favour of the employees and they will be sceptical about the companies taking this kind of insurance policies.


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