Chapter 5, Problem 1RE

Summary Introduction

Case summary: A person JS is the CEO of a company RL. The company RL deals in buying life insurance policies at a discount from patients who are on their death bed and sells the same to investors. The terminally ill patients receive payments as a percentage of future death benefits. The investors buy the insurance policies at 85 percentage of the value of future benefits. The patients utilize this money for their treatment, and the investors are entitled to a guaranteed return on their investment. The company RL draws a profit from the difference between the sale and the purchase price. According to JS, most of the policies are genuine, barring a few. Insurance companies, discovering the fake policies, might cancel them and refuse to pay.

To find:It is ethical for the person JS not to disclose the risk to investors about the cancellation of policies.

Explanation of Solution

The principle of rights elucidates the fact that human beings owe some basic or fundamental rights. These basic rights include the right to live, liberty, and pursuit of happiness. If someone invests money in something, then it is unethical not to disclose the risk associated with the same to them. The investors have a right to know the risks involved in the subsequent cancellation of policies. Therefore, it is imperative for the person JS to apprise the investors that the policies might be canceled at a subsequent stage.