The Future Looks Big For

Additionally, he said, more life companies are allowing their agents to be involved in life settlements.

Perhaps most importantly, Rencurrell noted that “significant” amounts of capital are coming into the market from institutional investors, to the point where individual investors from the old days of viatical settlements are “almost an extinct species at this point.”

However, McKeon said there does not seem to be a consensus that life settlements will continue to grow. Although McKeon said he believes there will always be some market for life settlements, he added that such an opinion is not universal.

“Some believe this will burn itself out,” he said, “that all the easy sales will have been made.”

Already, McKeon said, there is “more money than policies” in the life settlements market, and the “target sweet spot” of a senior with a big policy, declining health and the willingness to sell is fairly uncommon.

For the most part, McKeon said, life insurance companies are not overly concerned with the life settlements market just yet. The true impact on insurers’ profitability at this point, McKeon noted, “remains unclear” and the relatively small size of the life settlement market has lead to the mindset among many insurers that “this isn’t really big enough yet.”

In a recent conversation with an actuary at a “major life company,” McKeon said the actuary estimated that only about 1% of his company’s policies would be ripe for settlement.

Adding to the concerns about the potential for the market are the steps that could be taken to ensure that only the “true” settlements McKeon referred to will exist. The more ethical players in the life industry, insurers along with life settlement investors and producers, have encouraged steps to ensure that the process is more transparent. Additionally, he noted the life companies that are concerned about potential abuses have begun taking steps to weed out those policies that might be purchased for the settlement process by tightening their underwriting or adding questions to their application.

A number of life insurers remain skeptical of allowing their agents to be involved in settlements, and Rencurrell questioned why life insurance companies aren’t more supportive of the life settlements market, which he argued provides a boost to life insurance sales.

“The insurance companies need to start treating us as an ally,” he said, adding that life settlements “help boost the primary market significantly,” as consumers are more likely to purchase coverage if the prospect of a better return exists, should the need arise to sell the policy.

Many of the problems facing the life settlement market involve the transparency of the settlement process. Overall, McKeon said he believes that life settlements are a “positive feature for the consumer,” but there are also “a number of life settlement providers who need to clean up their act.” That portion of the industry, he said, represents “a number of providers that focus more on the commission they will earn instead of the true help they will provide their client.”

The financial incentives for a life settlement provider, he noted, are potentially very significant, given the high fees that are often involved with selling a life policy. “It’s not uncommon to end up with a 5-digit number, or even a 6-digit number” in fees and commissions at the end of a transaction, he said.