Dead peasants insurance. Profit from your death.

Britain�s top companies are secretly taking out so-called �dead peasants� insurance� in order to benefit from the deaths of their staff.
A Sunday Herald investigation reveals that firms have taken out thousands of policies on staff without their knowledge. The policies� value runs into hundreds of millions, and employers are entitled to spend the money as they wish .

An underwriting manager with a leading broker said: "Any firm in the FTSE top 50 takes out this insurance."

www.sundayherald.com...

There's little more than this in the link, and not much more in the actual paper except various views of the relevant 'that's terrible' commentators. I think it's still an investigation in progress though. Hopefully there�ll be more soon.
The implications are obvious though; Civil liberties aren't the only thing this is an affront to.
Another reason why I severely dislike Capitalism.

We know employees are to most companies nothing more than cattle, coming in somewhere below the photocopier and coffee machine in terms of importance; but now, like real cattle, our employers can pad their inflated bonus checks with money gained from our demise. Oh happy day.

I suppose we should be looking on the bright side eh? At least they don't use a bolt gun.


[Edited on 13-10-2003 by kegs]

While I agree that on the surface this sounds kinda ghoulish... I think that the idea that this is a profit generating tool is not correct. The fact is that the insurance companies are going to charge more than they will pay out.

The companies that buy the insurance are insuring to cover the costs of replacing an employee (or asset). If a company loses someone important, it can cost a fortune to replace the individual. Sometimes it can ruin a company.

But, admitted, it does sound creepy...

I can understand that kind of insurance, but it's not called dead peasants insurance for nothing; it�s taken out mainly on the rank and file workers.
It's also referred to as dead janitors insurance.
It is not a case of just insuring the important employees.

A quick search on the term has shown me this isn't a new thing stateside, a lot of union vs. company cases.
First link has the California Labor Federation currently sponsoring a bill (AB 226) to ban the practice in California.

An interesting background description of the practice in the U.S. from that site:
(www.unionvoice.org...)

Many large employers are engaged in the financial practice of taking out life insurance policies on thousands of their rank-and-file workers. These policies, called by the industry �corporate-owned life insurance� (COLI), but commonly known as �Dead Peasant� insurance, are entirely separate from the life insurance many employers provide to workers as part of their benefits. �Dead Peasant� policies list the company as the beneficiary, often without the knowledge of the workers or their families.

Throughout the past two decades, employers have taken out insurance policies on top executives, middle managers, and rank-and-file workers to protect the company from the untimely death of key executives, to pay retiree medical benefits and executive deferred-compensation programs. Employers� benefit not only from the death of the employee under COLI policies, but also benefit by borrowing against the policies.

Better than Gold. Until recently, the premium for these policies were considered a tax-deductible business expense, as with any other employee benefit. The I.R.S. has disallowed this practice and is further investigating such forms of tax shelter. According to articles in The Houston Chronicle and The Wall Street Journal (WSJ), at least 100 large U.S. corporations boost their profits by taking advantage of the tax-shelter features of this life insurance.

Proceeds from the insurance policies are not considered taxable income to the person (or corporation) who receive it, which means that after taking a generous break for the cost of the policy, the corporation receives a tax-free gift after its employees pass away. According to a February 19, 2003, WSJ article, COLI cost taxpayers $1.9 billion in revenue each year on a federal basis. This is more than what it costs to provide tax deductions for interest paid on student loans.

It is often low-wage employees who are covered under these policies, whose families are in the worst position to deal with the financial repercussions of the loss of a wage earner. According to the April 28, 2002, SF Chronicle, Wal-Mart Stores, Inc. took out COLI policies on more than 350,000 of its workers in the 1990s. Wal-Mart has recently dropped its policies, but only after running into difficulties with the IRS and being sued by a victim. The IRS disallowed interest deductions on the retailer�s dead peasant insurance � which no longer made the insurance a profitable financial tool. Vicki Rice is suing Wal-Mart in federal court in New Hampshire after the company made $300,000 off the death of her husband, a Wal-Mart worker. Mrs. Rice and her two children received no proceeds.

Millions of corporate serfs have policies placed on their lives by Fortune 500 magnates. Other examples of companies cited by the April 19, 2002, Wall Street Journal, holding COLI policies on their employees include:

Nestle USA � 18,000 workers covered
Pitney Bowes � 23,000 workers covered
Proctor and Gamble � 15,000 workers covered
Enron, American Electrical Power, AT&T, GTE, Basset Furniture, Dow Chemicals, Diamond Shamrock, Olin, PPG Industries, Trans World Entertainment, Winn-Dixie and Walt Disney.

This practice, although legal in most states including California, is unjust and repulsive. It is the workers� families who need the benefits of life insurance, not rich corporations or their executives.


According to a December 30, 2002, Wall Street Journal article on COLI, after the September 11th terror attack, some of the life insurance pay-outs went to employers and not to the victim�s families. Hartford Insurance Company alone paid out more than $2 million to employers relating to the attacks of September 11th. COLI life insurance covers death in the event of war as well, which, depending on the number of insured American lives lost in a war with Iraq, could further highlight this perverse tool of corporate finance.

I need to take a closer look at this. Sunday was the first time I heard of it.

Originally posted by kegs
I can understand that kind of insurance, but it's not called dead peasants insurance for nothing; it�s taken out mainly on the rank and file workers.
It's also referred to as dead janitors insurance.
It is not a case of just insuring the important employees.

One thing I've noticed is that too many employers only think of the "executive" ranks to have any real importance to the company, but that line of reasoning is completely skewed; Consider that, without the regular "rank & file so-called peasant" workers, the company would fold even quicker than it posssibly could with even a half-roster of executives. And yet, when it comes time to "downsize", they get rid of the lowest-ranking workers first...In effect, they're chipping away at the base-level of their pyramid.

...And they *refuse* to see it!...

Technically speaking insurance can be obtained by anyone if they have a justifiable 'financial interest' in annother person or thing.

As pointed out here, these policies must be costing these companies a great deal of money.

I would not worry unless there was a lot of employees suddenly dying.

Maybe 911 had something to do with all of this too?

Terrorism has yet to really hit the corporate world.

It doesnt cost anything to replace a minimum wage employee.

The fact that so many companys are taking out policys leads me to belive their in the know and things in the world are about to change.

Perhaps the order of the world is going to change and these companies will need this money to replace there dead Janitors and peasants.

one interesting note. Enron had lots of 'dead peasant' insurance, also called janitor insurance (i kid you not), on many long time employees. It was one of many problems they had. Peasant insurance has a very long history. The original intentions were quite valid. It remarkably enough, does cost a great deal to replace minimum wage workers. In fact, far more than it costs to retain low wage workers. A German company, Aldi is a stellar example. They are a cut rate, low price grocer, that pays its checkout people far more than the industry average. As a result they retain most of their lower wage employees for a much longer period than the industry average. The net result is lower labor costs, resulting from lower absenteeism, fewer training costs, and an intangible benefit of higher customer satisfaction resulting from line level employees that actually care about keeping their jobs.

There is no question that dead peasant insurance has been abused. But some companies can utilize this leagal and effectvie insurance in completely above board ways. This is often not the case, which is resulting in it being investigated in many shadier companies dealings.

The point is that so many companies are using it as a money making scam, that's why there's such a furore.
A life insurance policy accrues a cash value that is tax-free, so the company gets tax-free earnings from its insurance policy on an employee. The death benefit of a life insurance policy is not subject to taxation, either. Insurable interest exists when the insurance becomes effective, the insurance remains in effect even after the insurable interest ends, so if an insured worker quit the company, the company would still benefit from its insurance policy on them. Large companies can insure its employees, look at general mortality tables to predict how many would die, and know what the company's return on investment would be. Small companies can't afford to do that. It's a little like playing on the stock market with your life. I'm talking in terms of the U.S here; it is illegal in some U.S states.
Amazing what you can learn on the net 'aint it?


For the U.K folks, the full article from the Sunday Herald is up now, I don't have much more info than that just now.

www.sundayherald.com...

Peasants insurance, is kind of a misnomer... More and more companies are looking closer at their B employees (those who form the backbone of their company...do the work, don't raise a fuss, and are loyal), than their A employees... The reason is that A employees are always looking for the bigger better deal, whereas the B employee craves stability. Sometimes, it can be hard to lose B employees, and then try to replace them... Such insurance makes sense...but I'm not so sure it's ethical without the employee's consent... To me, it isn't... A person is not an asset to be bought and sold...they are more than that...and should be treated as such...

Gaz, I agree to an extent. However, employees are an asset. If they die, the family does not pay replacement costs, and no one woudl say they should. So as an asset to a company, the company is well within its bounds to insure against their untiemly departure. Its the over use of this insurance by companies committing shady practices that has most up in arms about this.