To The Editor:
I was pleased to read John Skars article in the March 17 issue about life settlements, not because I agree with most of his comments, but because it is good for agents, brokers and, most importantly, our clients, to have the chief actuary of a major insurer engaged in an open discussion about life settlements.
We do agree on one fundamental point. Clearly, when an insureds health has deteriorated, the poilicy should, in an ideal world, be maintained by the policyowner. Having said that, the reality is policies are not kept in-force. Indeed, Milliman & Robertson estimates that 89.5% of all universal life policies do not mature in a claim.
Given that fact, a life settlement is a good option if the policyowner will surrender or lapse the policy anyway. Rather than lapse or surrender, I think every reader would agree the policyowner is better served by receiving 450% of cash surrender value (Coventrys average purchase price) than the cash value.
With a life settlement, our clients have another option. More options mean a better, more flexible, more responsive product. Simply put, we make life insurance more valuable!
More important than any disagreements we may have, Mr. Skar should be applauded for engaging in the debate. Too many carrier executives, actuaries in particular, have been unwilling to speak on the record. By Mr. Skars participation in an open discussion about life settlements, we are better equipped to help our clients make more informed decisions.
On another topic, Mr. Skar and Mass Mutual should be applauded by everyone for providing outstanding leadership in creating the LifeBridge program. With LifeBridge, Mass Mutual is using life insurance to enhance the educational opportunities for many children with few or no options. If more carriers would follow their lead, the industry could do extremely well by doing enormous good.
Alan H. Buerger
Fort Washington, Pa.
To The Editor:
Thank you for continuing to provide helpful, educational information regarding the topic of life settlements. As one who has been involved with both life and viatical settlements almost from the beginning of the industry, it never ceases to amaze me how critics miss the key point. Life and viatical settlements are initiated by the owner or insured, not by agents. The owners or insureds are the ones who decide that they no longer wish to keep their policies.
There is no army of agents and brokers out there trying to convince people to unload their policies. That would be a complete waste of time, and it is not occurring. If a person must be persuaded to do a life settlement, there should be no life settlement.
Here is the real issue. If a person has decided to lapse or surrender a policy, should that person not have the right to see if they can get a better deal by selling it? It is hard to fathom that anyone would answer this question with a “no.” Advisors have an obligation to make their clients aware that this option is available, not promote it.
Life companies constantly preach persistency to their agents. The National Association of Insurance and Financial Advisors gives out awards for persistency. Life settlements aid persistency. If a person does not want to have their medical information given out or their life tracked, then they should not sell the policy. Most would view these things as inconsequential if someone is willing to pay a significant premium over lapse or surrender.
Reproduced from National Underwriter Edition, March 31, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.