The thing to remember is that Insurance is legalized gambling.
When you get an insurance policy, you are betting that the thing that the policy covers is going to happen, and the Insurance company is betting that the thing the policy covers is not going to happen. The cost of the policy is set by the insurance company at a rate that they believe will earn them more money than paying out on the policy will cost them (taking into account the odds of the event happening)
When you look at it this way, a company taking out a life insurance policy on their employees, paying the premiums and keeping the results of the policy is only questionable in terms of if this is a good envestment of company money, no ethical questions at all
With this move, Google is probably not using an external Insurance company (who would have to earn profits), they are probably 'covering their bet' themselves (and they have the money to be able to do so).
Google is betting that the additional employee loyalty that this will earn, and the reduced amount of stress on employees (includeing the stress on management who care about their people and their families) is going to be worth it in making Google a better company.
They may not be thinking of it in these cold, ledger balance terms. But this is the logic that they are following, even if they aren't aware of their thinking.