Life Settlement Training? Basic and Homegrown

By

Life insurance agents who want to add life settlement advice to their toolbox may have to make an effort to educate themselves.

Alan Buerger, the chief executive of Coventry First L.L.C., Fort Washington, Pa., expects to see several major new players respond to growing interest in the subject by introducing life settlement education courses in the next few years.

But for now, training in the viatical and life settlement fields is still in its infancy.

The Viatical and Life Settlement Association of America, Orlando, Fla., is not aware of any large, national, independent training firm that offers courses that focus on the life insurance policy resale market, according to Doug Head, the groups executive director.

“Weve thought about doing it ourselves,” Head says.

But the VLSAA is small, and it would prefer to work with an outside organization, he adds.

For now, agents must rely mainly on their own legwork, and courses and materials developed by the life settlement companies.

Coventry First, one of the biggest life settlement companies, has set up a nonprofit arm, the Coventry Center for Financial Professionals, that runs the countrys the most extensive life settlement education program.

“We offer courses in every state that requires continuing education,” says Buerger.

More than 20,000 life insurance agents, lawyers, accountants and financial planners have taken the courses, which range in length from 1 to 3 hours, in the past year.

Coventry First did not set up the program because it wanted to get into the continuing education business. “We did it because there wasnt any education in this area,” Buerger says.

Other life settlement companies have come up with similar, do-it-yourself education strategies.

Rumson Capital Inc., Jenkintown, Pa., a life settlement company that offers free errors and omissions coverage for agents, has developed a product presentation seminar for agents that lasts about 2 hours.

The firm also offers one-on-one tutoring for agents who want to send it business.

Robert Meyer, Rumsons general counsel, says he is not sure what a longer life settlement seminar would cover.

In the life insurance policy resale market, “every transaction is unique,” Meyer says.

Regulators and life settlement companies have been debating about what kind of license brokers ought to have to arrange life settlements.

In June, the NAIC adopted a final viatical and life settlement model regulation that leaves out any mention of separate life settlement broker licensing requirements.

The American Council of Life Insurers, Washington, and the National Association of Insurance and Financial Advisors, Falls Church, Va., continue to argue that life settlement brokers should have extra training and extra licenses.

“Good consumer protection dictates that someone who is urging a policyholder to viaticate his or her policy should understand the risks and benefits,” the ACLI says in a statement about viatical and life settlements. “This knowledge can only be guaranteed with the separate education a broker would receive when applying for a license to sell viaticals.”

But the ABA Real Property, Probate and Trust Journal helped increase interest in life settlements in late 2003, by publishing a paper by Neil Doherty, a Wharton risk management professor, and Hal Singer, an economist, about the value of the secondary life insurance market to policyholders.

In the paper, the researchers estimate life settlement firms paid $336 million in 2002 for 1,584 policies with a total of $93 million in surrender value. The deals produced $243 million in extra value for the policyholders, the researchers conclude.

Stewart Shannon, president of Assured Viatical Inc., Bethesda, Md., says every agent should mention resale options to older insureds or terminally ill insureds who are thinking about surrendering policies or letting policies lapse.

“Most people just dont understand that life insurance is an asset,” Shannon says.

Even in the world of accountants, lawyers and high-end financial planners, “I think a lot of people are simply unfamiliar with life settlements, period,” says Errold Moody Jr., a San Leandro, Calif., financial planner. Moody helped arrange a $667,000 life settlement for a 77-year-old client who had an unsuitable, $5 million life insurance policy that was costing her more than $200,000 per year.

The client and her daughter talked to experts around the United States for more than a year before Moody decided to try to help them market the policy to life settlement companies himself.

Moody says he thinks a life insurance agent has to be fairly sophisticated, and persistent, to package a policy for resale and deal with the life settlement companies.

When Moody mailed his first batch of 6 packages, “I didnt even get a reply,” he recalls. Moody then sent more packages and eventually received 3 offers.

Coventry First and Rumson are not the only life settlement companies that have developed life settlement education programs.

Legacy Benefits Corp., New York, a life settlement provider, has posted an extensive marketing guide for agents on the Web, and 1st Life Financial L.L.C., Orlando, has released The Life Settlement Selling System, a package that includes a strategy for identifying life settlement prospects and sample marketing letters.

The American College, Bryn Mawr, Pa., offers several pages of information about viatical and life settlements in the course materials for its Chartered Life Underwriter program, according to Ed Graves, the colleges chairman of life insurance.

Meyer, Rumsons general counsel, says he does not believe agents who simply refer clients to life settlement brokers really need any special background or credentials to discuss life settlement options, except in states that impose formal requirements on the referring agents.

What Rumson really wants to see when it works with a new agent is good character. The firm uses a questionnaire to review advisors backgrounds, and it looks closely at any references to disciplinary problems.

Rumson itself reviews proposed transactions to see whether they seem to make sense for the insureds and to verify that the health information about the insureds seems to be accurate, Meyer says.

“We have the ultimate relationship with the insured,” he says. “Were where the buck stops.”

But, if a 75-year-old man offers his policy to Rumson, “were not privy to his personal financial condition,” Meyer says. “Were not giving him financial advice.”

Although some kind of background in financial analysis might be helpful to an advisor, “every transaction is unique,” and a financial advisor with more experience or a highly regarded credential might not get better results than a less experienced advisor with a different background, Meyer says.

Moody, who holds the Certified Financial Planner designation as well as a California life and disability license, says advisors who talk about life settlements probably could use a combination of a half-day life settlement seminar and years of experience with financial planning and analysis.

The seminar content might include general information about life settlement underwriting, an introduction to the art of predicting life expectancy, and advice about how to present a case to brokers, Moody says.

The content also might include advice about how to handle the emotions of clients who are deciding whether trusted advisors sold them the wrong products or deciding whether they can afford to leave an estate.

When clients sell policies without replacing the policies, “theres nothing there when they pass away,” Moody says.


Reproduced from National Underwriter Edition, September 16, 2004. Copyright 2004 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.