I've heard of this before. One aspect I find really interesting is that the employees at Wal-mart who are insured under this kind of policy are not notified about it. From AlterNet: How Things Work in Texas by Molly Ivins:

There you have it -- Phil [Gramm]'s perfect for the job. Mr. Charm. And he knows how to talk those seniors into getting rid of Social Security. He's in practice. He's been back here in Texas lobbying to make it legal to sell 'dead peasant' life insurance to the Teacher Retirement System.

'Dead peasant' insurance is such a deal that Wal-Mart and lots of big companies do it. See, a company like Wal-Mart takes out life insurance on low-wage employees (that would be Texas teachers), then it gets to deduct the premiums from its taxes. And when the employee dies, the company gets a benefit between $64,000 to more than $250,000.