The product discussed by Dave Hofman at Concurring Opinions really isn't insurance but an investment product that pays out at a specific date in the future, or upon divorce, whichever first occurs. He posts:
The externality problem seemed so severe that I decided to go to the source, and emailed John Logan about his product. He was nice enough to chat with me for a few minutes, and I can now share the fruits of that conversation with you.
I started the conversation believing that Logan was offering a true insurance product. A business methods patent the company may have filed stated that divorce insurance is:
1. An insurance policy covering at least some financial consequences of the untimely ending of a contractual relationship between two or more natural persons, which contractual relationship governs the natural persons way of living together.
12. A method of doing business comprising: determining a periodic amount to be charged a prospective participant for divorce insurance; charging that periodic amount to a participant in an insurance program over a period of time; and administering the insurance program.
But when I talked to Logan, he preferred to call the product to be offered a "hybrid insurance/investment product." The idea is that individuals would buy the right to a payout, in 25 years, of a fixed sum, and in turn promise to pay premiums priced based solely on the total face value of the instrument. The instrument – let's call it an annuity for ease of reference – has a contingency: if its owner gets divorced, the annuity pays out immediately, at a rate to be calculated based on the time since purchase and the premium rate. That is, the longer you stay in the marriage, and the closer you are to the end of the 25-year annuity, the more money you will get paid on divorce. The product does not seem to intend to graduate premiums at all based on the risks of divorce, or the "why". It is a fairly simple investment vehicle. The only other bell I learned about was their plan to permit individuals to recapture premiums at any time, so long as they purchase an initial premium rider, which is a bit of departure from ordinary insurance practice.
Because this isn't an insurance product, Logan plans to market and run his business largely online, with little or no need for the ordinary back-end costs of an insurance business (actuaries, etc.) That said, he still needs an initial capital investment, and is still looking for additional investors before the product launches. He hopes to roll out "divorce insurance" this fall, if the financing lines up. He estimates a premium market approaching $200 billion annually, based on a base premium of something like $1,200 annually per policy.
Now, some comments to the post from Logan:Yipes! Much like Life Insurers never use the term “Death Insurance”, we much prefer the term Marriage Insurance. In fact, unlike Life Insurers who don’t reward anyone who lives past the term of their coverage, SafeGuard provides a much richer benefit to those who do successfully complete the term of our contract, meaning, still have a successful marriage after 25 years...
... we know in some states we will be regulated under the auspices of the departments of insurance so in fact we’ll follow the same guidelines as any insurance company in those states.
And we’re definitely NOT an annuity since the differences are substantial, but few people understand what a “Face Amount Certificate” is which is a closer description from an investment perspective...
We agree with the idea that thinking about divorce right before (or after) you’re married has a MAJOR “yuck factor” which is why we want people to invest in the SUCCESS of their marriage and we’ll gladly make them wealthier if they follow through on their wedding vows of “’til death do us part”…well before the “death” part. But the fact remains that in today’s world divorce is a real and tangible risk for anyone who marries, so hopefully, we’ll take the place of many pre-nupts which tend to be one-sided anyway.
Hat tip to Family Law Prof Blog for directing us to this interesting discussion.
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