As the secondary market for life insurance policies continues to evolve, the companies conducting the transactions are continuously looking for fertile new ground to cover, and for new ways to attract advisors and encourage them to include life settlements among their offerings.

Failing to find enough cases to keep an advisor’s interest can be a problem for the secondary market. Cameron Dressander, of Dressander and Associates Inc., Naperville, Ill., was in just such a situation.

The firm “has been approached many times” about life settlements, he said during a July 2008 webinar sponsored by his firm, but he was “never interested that much” due to the relative scarcity of cases, which have traditionally been focused on older seniors.

“Cases that are out there are not that frequent,” he said.

Perhaps the most attractive market for virtually anyone in financial services has been the baby boom generation, which has just started reaching retirement age. Yet that generation has been out of reach for more traditional life settlements, which typically look for insureds roughly 70 years of age or older. But now, a focus on that market has started to develop.

“Early life settlements,” according to Ralph Russell of Trinity Life Settlements, LLC, Downers Grove, Ill., are focused on bringing term policies held by insureds as young as 55 to the settlement market after converting the policies to universal life policies.

These policies have not made a huge splash on the secondary market up to now, he noted, due mainly to the longer life expectancy for the insured. The offer is intended for those term policies that can be converted to universal life, Russell said, adding “most of those policies have conversion privileges.”

The transactions can be a boon for both insured and advisor, he contended, explaining that they turn a no longer needed term policy with zero cash value into thousands of dollars.

Agents are typically paid for the conversion, he said, and clients will generally receive “a majority, if not all” of what they paid in premiums over the years for their term policy. Additionally, the target premium is split between the firm and the advisor.

“You’ll be surprised,” Russell said of advisors who speak to their clients about settlements, “how few of them even know that their term policy has secondary market value.”

The application his firm uses is “straightforward,” he said. For instance, it asks for information about the insured and the policy. In particular, it seeks information to ensure the ownership of the policy, which Russell said increasingly involves trusts or corporations.

Russell also said the process addresses concerns about insureds’ personal information. Identifiable information is redacted from policies in the portfolio, he said. The only thing his firm holds, he said, is an insured’s Social Security number, which is assigned a PIN number as a substitute.

“Just don’t let your baby boomer clients’ convertible term policies lapse,” he said.

The change to focusing on younger insureds, those with term policies and who are 55 or older, “opens up a whole new baby boomer market,” Dressander said. There are a far greater number of potential cases here than previously recognized.

An advisor can undertake efforts to see if any clients are in a position to gain from a settlement, according to Russell. This would include performing an insurance audit to gauge client needs and current coverage.

Additionally, Russell noted that simply increasing awareness and “getting the word out” about the possibility of settlements to clients can lead clients to inquire about the process further and ultimately seek to sell a policy they no longer need or want.

Given the state of the economy, he said, a settlement can help a client make a gain during on otherwise difficult financial time. “We’re seeing a lot of volatility” in the financial markets, he said, and the gains from a life settlement can “soothe that a little bit.”

The possibility of a life settlement may also be a favorable outcome given the circumstances that many baby boomers are finding themselves in as they move toward retirement. “Key man” policies are an important part of insuring a business, and with many of those “key” employees retiring and not needing the coverage, Russell advised taking advantage of that opportunity.

“Definitely have that conversation with you business owner clients,” he said.