A sampling of 11 life settlement companies showed they paid a total of more than $854 million above cash surrender value to owners of life insurance policies during the years of 2004 and 2005, the Life Insurance Settlement Association says.
LISA, Orlando, Fla., says the study was designed to quantify the impact of life settlement companies by showing how they paid insureds over the 2-year period.
During that period, the companies settled 3,437 policies. Of those, 2,025 were sold on the secondary market during 2005, a sharp increase over the 1,412 sold during 2004.
The number of newer policies sold on the secondary market also rose between the 2 years. In 2004, 30.7% of the policies sold had been purchased within 2 to 5 years before, with that figure rising to 35.2% the next year.
The data on policy age is incomplete, however, in that no age of the policy was given for 28.2% of policies sold during 2004 and 24.2% of the policies sold during 2005.
The report, officially dubbed the Data Collection Report, was a result of discussions at the 2006 LISA spring meeting in New York, the group said. Before the release of the report, industry data for the life settlements market was only gathered by LISA anecdotally from its members.
“These initial estimates are supported by the Data Collection Report, which gives real substance to the trends we have reported,” said Doug Head, LISA executive director.
LISA plans to continue amassing statistical data on the life settlement industry to add to the debate on issues relating to the market, Head said. “While the rhetoric of the debate is often fueled by conjecture, it is helpful to have facts which support our contribution to consumers,” he added.
The measured companies were involved in transactions that resulted in total payments of $1.2 billion to consumers during the 2-year period, exceeding the total surrender value of those policies by $854,115,494, the report said.
To put the figure into context, “on average, if every consumer that settled a policy in 2005 had decided to surrender, they would have received $98,000 instead of $364,000 from a settlement,” LISA said.