In recent decades, cancer treatment costs have outpaced the general inflation rate The costs are now so exorbitant as to easily bankrupt the average family.
Cancer now often puts patients and their families in a quandary. The options open to them are either to undergo costly but very likely unsuccessful treatment, or to forgo treatment and face the grim reality of certain death. This is not a case of your money or your life. Quite often, it is a case of your money AND your life.
A financial instrument that transforms the patient's obligation from fee-for-treatment, to fee-for-successful-treatment could resolve this dilemna. An unambiguous measure of a treatment's success is lifespan after treatment commencement. Instead of paying a huge sum of money at outset for an uncertain fate, payment could be due for each year/month survived. Such a swap instrument is, in effect, an insurance policy on the life of the patient. It may seem reckless to issue an insurance policy to a cancer patient. However, we need to recall that for a risk to be insurable, certain conditions have to be met. For many cancer cases the author shows that these conditions are indeed met.
These conditions are as follows:
- The applicant for insurance must have an insurable interest in the loss event
- The likelihood of the loss event needs to be remote
- The loss event must not be susceptible to moral hazard
- The loss event must be well defined, and unambiguous
- The possible loss must be substantial and measurable
The author demonstrates how recent developments have ensured that these insurability conditions are met. The author also points out some practical hurdles and suggests how they may be overcome. Finally, he discusses likely secondary benefits for the various participants in its market and society in general.