James Stilton is the chief executive officer (CEO) of RightLiving, Inc., a company that buys life insurance policies at a discount from terminally ill persons and sells the policies to investors. RightLiving pays the terminally ill patients a percentage of the future death benefit (usually 65%) and then sells the policies to investors for 85% of the value of the future benefit. The patients receive the cash to use for medical and other expenses, and the investors are "guaranteed" a positive return on their investment. The difference between the purchase and sale prices is RightLiving's profit. Stilton is aware that some sick patients may obtain insurance policies through fraud (by not revealing their illness on the insurance application). An insurance company that discovers such fraud will cancel the policy and refuse to pay. Stilton believes that most of the policies he has purchased are legitimate, but he knows that some are probably not. Answer the following questions: Under the categorical imperative, are the actions of RightLiving ethical? Why or why not? Using the IDDR approach, discuss the decision process Stilton should use in deciding whether to disclose the risk of fraudulent policies to potential investors. What are other ethical concerns that Stilton may be facing?

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

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James Stilton is the chief executive officer (CEO) of RightLiving, Inc., a company that buys life insurance policies at a discount from terminally ill persons and sells the policies to investors. RightLiving pays the terminally ill patients a percentage of the future death benefit (usually 65%) and then sells the policies to investors for 85% of the value of the future benefit. The patients receive the cash to use for medical and other expenses, and the investors are "guaranteed" a positive return on their investment. The difference between the purchase and sale prices is RightLiving's profit.

Stilton is aware that some sick patients may obtain insurance policies through fraud (by not revealing their illness on the insurance application). An insurance company that discovers such fraud will cancel the policy and refuse to pay. Stilton believes that most of the policies he has purchased are legitimate, but he knows that some are probably not.

Answer the following questions:

Under the categorical imperative, are the actions of RightLiving ethical? Why or why not?
Using the IDDR approach, discuss the decision process Stilton should use in deciding whether to disclose the risk of fraudulent policies to potential investors.
What are other ethical concerns that Stilton may be facing?

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