The main problem is that the company stands to gain if the death rate among their employees is higher than average, so they pay fewer premiums to get to the payoff. That might incentivize them to reduce health benefits for employees.

But the actuaries at the insurance company price that added risk into the premiums.

I can see there being a big difference in death rates between, say, an Alaskan crab fishing operation and a suburban CPA firm, but 'job' is one of the questions that's asked by life insurers so that's already accounted for.

How would a white collar office employer legally engineer a higher death rate for their people than an equivalent company down the street? Providing only fries and burgers in the canteen? Relocating to an office block near a chemical waste plant? Nothing really seems feasible or effective enough to make a measurable difference to the performance of the investment scheme. The added investment return bought by shortening the lives of some percentage of staff by a few years would be just noise compared to the tax savings this vehicle provides.

The ethical dilemma is whether you should be able to buy insurance against events where you have no direct stake.

Should my employer be insured against my death? What about customers deaths? What about _potential_ customers deaths? What about events other than death?

Or to put it another way, in what way is insurance different than gambling?

In some or perhaps most of these cases this is probably more about managing finances than anything else, but a company has at least a theoretical direct stake in its employees. At the risk of sounding blunt, they incur the cost of having to replace them and the lost productivity in the mean time. If the employee is, say, the lead developer at a startup then having insurance on them might be the difference between the company being able to hire a replacement or having to fold.