CCAR RESPONSA
Can We Approve of “Beneficial Options”?
5753.21
She’elah
Beneficial Options is a company which finds investors willing to buy the life insurance policies of AIDS patients who are not expected to live more than twenty four months. The patient gets cash with which to pay medical and living expenses (most life insurance policies do not pay out during the life time of the insured). The investor, who becomes the beneficiary of the policy, receives the death benefit upon the death of the insured. The company receives a fee for its management services.
From the standpoint of Jewish tradition is there something unethical about this business arrangement?
Teshuvah
Beneficial Options is a company which essentially profits from a matching service. They enable AIDS patients – who are clearly in extremis – to sell the rights to a precious contract in order to provide some immediate monetary assistance or relief at a most difficult time. A close analog in Jewish law to this situation arises with the sale of a ketubah.
In the Shulchan Aruch (EH 105:1) it is stated that a woman may sell the benefits of her ketubah – either wholly or in part – to others, and that the recipients of the ketubah benefits receive payment from its monetary provisions if she is widowed or divorced. Of course, if she dies while the husband is still alive, they would receive nothing. The ketubah acts as a promissory note which the wife (creditor) holds against the husband (debtor) and his estate. Like other such notes, the ketubah may be used in a variety of business transactions. The wife may sell it in order to raise cash. She obviously cannot sell it for much though, since the buyer would collect the money only if the wife survives her husband or is divorced. Should the husband survive the wife, the buyer would get nothing. Plainly, the potential investor would only pay a “minimal amount” (Rashi, BT. Baba Kamma, 89a) for such a risky proposition.
In the present case, the investor can certainly expect better returns since the AIDS patient is terminal. The buyer will indeed collect on the policy; hence, he/she will be prepared to pay a greater sum for it. The company believes this to be a better deal for the patient as well, since he/she will collect a significant amount of desperately-needed cash which, without this buyer, would be unavailable.
Of interest to our question is the fact that the traditional literature condemns neither the wife nor the buyer of her ketubah for committing an unethical act. To be sure, it recognizes that the wife would sell the ketubah only under severe financial duress (BT. Ketubot 53a). Yet this does not invalidate the transaction. In discussing the theory behind the law of sale, the Talmud notes that “nobody would sell anything were they not under some degree of compulsion; still the sale is valid.” Thus, as the Gemara explicitly states, “if they hang him (from a tree) until he sells, his sale is a sale” (BT. Baba Metziah 47b; see SA, YD 205:1 for the limitations to this rule). The point is that a financial decision made under duress is not necessarily irrational; indeed it may be the best option available under a very difficult set of circumstances.
In the contemporary AIDS circumstances, no human agency is doing the “hanging.” The patient has a terminal disease; s/he needs money, and this device allows him/her to raise cash at no cost to him/herself. This is a rational plan. It is also, quite arguably ethical: by enabling a person to purchase medical care, that individual may well be purchasing an extension of life. As a result, it might cogently be maintained that there is an element of pikuach nefesh (saving a life) here which cannot be ignored. Hence, we ought not to condemn the Beneficial Options proposal lightly.
On the other hand, it is inaccurate to say that “nobody gets hurt” under this proposal. The patient has beneficiaries, loved ones who stand to collect the death benefits of his/her policy. The point of life insurance, after all, is to purchase protection for those who are dependent upon the insured financially. If Beneficial Options advocates the sale of the entire face value of the policy, the beneficiaries of the AIDS patient will be denied this protection.
Here too, the ketubah analogy is helpful. Halakhah prescribes that the wife who sells her ketubah does not lose the benefits which customarily accrue to her as a result of marriage. In addition to the food, raiment and conjugal rights provisions detailed in the Torah (Exodus 21:10), she continues to receive most of the benefits of the ketubah which were ordained by the rabbis (see M. Ketubot 4:7-12). These include the requirement that the husband ransom his wife should she be taken captive, and provide her medical expenses should she fall ill. They also include the provision that the wife’s sons from this marriage (i.e., excluding her husband’s sons from other marriages) will inherit the sum of the ketubah, as well as the rule that her daughters from this marriage will be supported from their father’s estate until they themselves are married. In other words, neither the wife nor her “beneficiaries” lose the essential protections afforded by the ketubahin the event that she decides to sell it.
Similarly, we might say that the proposal of Beneficial Options is both legal and ethical in the eyes of Jewish tradition, provided that the beneficiaries of the insured are not stripped of necessary protections by the sale of the policy. In many cases the heirs will need money to pay medical bills, and in some instances to provide for their own minimum care. In actuality, it is, of course, extremely difficult to achieve an appropriate balance between the needs of the patient and those of the beneficiaries. If the beneficiaries were so inclined, they could, presumably, waive their rights on behalf of the buyer, but if the beneficiaries are minors this would obviously be inappropriate. In practice, therefore, it would usually mean that the beneficiaries would have to be guaranteed at least some of the death benefit, and this, in turn, would make the deal less attractive to potential investors. Nevertheless, if the Beneficial Options proposal is to be regarded as ethical, it must include some formula which acts to encourage the safeguarding of the financial needs of any beneficiaries.
Of course, the Beneficial Options proposal must also be seen to operate ethically in practice. For clearly there are two potential sources of duress operating in a given sale: a) the duress brought about by the illness, which makes the sale conceivable in the first place, and b) the duress brought about by an enthusiastic salesperson who may be over-eager to conclude a transaction. Naturally, the patient must be protected against any pressure tactics, so that a reasoned, rational decision can be made on the merits of the proposal. Based on the principle that we “do not place a stumbling- block before the blind” (Leviticus 25:17), Jewish law advocates a position prohibiting the salesperson from providing ill-suited advice – particularly to a vulnerable individual – in order to make a sale (Yad, Hilkhot Rotzeach, 12:14). Moreover, in these circumstances, we would surely expect the salesperson to act “lifnim mishurat hadin,” “beyond the strict letter of the law” in ensuring that proper advice and a reasonable period for thoughtful consideration was provided. A brief mandatory waiting-period may well be desirable between the initial proposal and the conclusion of the transaction, in order that family-members and advisers might be consulted. Further, just as for the ketubah, it should be expected that the transaction will be appropriately witnessed as being the “voluntary”, free act of the patient who decides to sell part of the value of his/her policy.
Provided then that the legitimate interests of the beneficiaries are protected, and that the terminally ill individual is not pressured to make a poorly-advised decision, such a business arrangement would be considered ethical from a Jewish standpoint.
If needed, please consult Abbreviations used in CCAR Responsa.