Business Ethics of Butterfly, Inc.

Tom Cooke is the chief executive officer (CEO) of Butterfly, Inc., a company that buys life insurance policies at a discount from terminally ill persons and sells the policies to investors. Butterfly 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 Butterfly’s profit. Cooke 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. Cooke believes that most of the policies he has purchased are legitimate, but he knows that some are probably not. Answer the following questions in paragraph form: In a few words, explain principle of rights. Would a person who adheres to the principle of rights consider it ethical for Cooke not to disclose the potential risk of cancellation to investors? Why or why not? In a few words, explain categorical imperative. Under the categorical imperative, are the actions of Butterfly ethical? Why or why not? In a few words, explain utilitarianism in ethics. Under utilitarianism, are Cooke’s actions ethical? Why or why not? If most of the policies are legitimate, does this make a difference in your analysis? In a few words, explain the IDDR approach. Using the IDDR approach, discuss the decision process Cooke should use in deciding whether to disclose the risk of fraudulent policies to potential investors. What are other ethical concerns that Cooke may be facing? Explain why they are concerns.
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