The growing trade in US life policies raises ethical and regulatory issues, according to a report from the Pensions Institute at Cass Business School.

Investors are showing interest in the diversification potential of second-hand life policies, sold by policyholders who no longer need the cover or want to raise money.

But regulation is inconsistent, with policy sales in some US states, including California and New York, entirely unregulated.

Debbie Harrison, co-author of the report, said the major concerns for investors were whether it was ethical to profit from someone’s death, and the safeguarding of
policyholders’ privacy.

The report concludes that, provided there is full transparency for the original
policyholder and the end investor, the ethical considerations are the same as for other investments based on mortality projections. But it advises that regulators and market participants should “work towards standard regulation in all US states”.

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