Dead Peasant Insurance Policy - Essay Example

Since most companies have exploited dead peasant insurance policies, there is a public concern in the matter. According to the Wall Street Journal, the dead peasant insurance policy originated from a company that secretly insured the life of 36,000 of its employees under the tag dead peasants. The public ought to take exceptional care and concern, especially if they are employees of various organizations. They ought to do so because the Company Owned Life Insurance is tantamount to a death threat to an employee. Several documented cases of companies hiring hitmen to kill their employees exist. Some unscrupulous companies have engaged in heinous acts to claim tax-free benefits without the consent of the deceased family. Besides, every employee has the right to be informed of any insurance policy that he/she takes or ought to take (Martinez, 37).

Assuming that the problem with the dead-peasant policy is real as it is, I would take several measures to deal with the problem. Fundamentally, I would ensure that all companies adhere strictly to America’s insurance regulations, including recent reforms in the sector. One of the measures that I would take first would be to ensure that all companies follow the Pension Protection Act of 2006 which sought to regulate companies from the dead peasant program. The law dictates that any company that wishes to subscribe their employees to the dead peasant policy must seek consent from concerned employees first. To maintain transparency and accountability in the process I would necessitate a mandate to submit their annual Company Owned Life Insurance (COLI) reports to the IRS (American Agora Foundation, 280).

My fix would not have unintended consequences in the dead peasant insurance policy. Since the fix would prevent potential companies from defrauding their employees or committing crimes to enjoy their employees’ insurance benefits. The ramifications of taking restrictive measures will be part of the anticipation to cushion employees from uncouth acts by their employers. Companies will tend to ignore the dead peasant policy because they will no longer benefit from it as before. It means that most corporations will stick to the best practices that are required of them. In addition, companies will uphold high standards of transparency and accountability, especially in matters about employee insurance (Conard, 156-160).

When one views Company Owned Life Insurance (COLI) from a policy perspective, government failure is more salient than market failure. The misdeeds by companies, in their pursuit of COLI, would have constituted negative externalities if the employers and their employees were rivals operating in a given market segment. However, it is the case where one party is in a contractual relationship with the other for paid services. Under the 2006 Federal law of the United States, all companies must seek the consent of their employees before buying such employees' life insurance. It will enable the companies and their employees to obtain a policy treatment with a tax preference. The agency taxed with the responsibility of regulating the operations of companies failed to do their job even after Congress had passed the necessary laws (Prosten, 81).

The Internal Revenue Service (IRS) is the agency of the United States responsible for tax law enforcement and the collection of taxes from various companies and agencies. In as much as companies that have subscribed to the Company Owned Life Insurance (COLI) must present their annual reports to the Internal Revenue Service (IRS), IRS has the responsibility of ensuring compliance by the corporate world. Any failure of a company to submit its annual report takes the blame on the Internal Revenue Service (IRS), which is a government agency. In this sense, one can attribute government failure to the rampant dead peasant policy programs that are unfavorable to the affected employees and their families (Norman, 24-30).

Several factors have led to the existence of dead-peasant insurance policies. One of the factors is the laxity of the Internal Revenue Service (IRS) which has largely condoned the vice in the sense that it rarely cracks down on rogue companies that seek compensation for their COLI. Since the companies buy life insurance for their rank-and-file employees, the companies do not have an insurable interest in the lives of their employees. IRS condones COLI since proceeds from dead peasant insurance policies are not taxable. In a world without taxation, the dead peasant policies would not have any incentives to existing.