Life settlement firms face special challenges when assessing the life expectancies of the insureds.
Medical directors for life settlement underwriting firms talked about those challenges here during a panel discussion at the Life Settlement Summit.
The event was sponsored by National Underwriter and its parent company, Summit Business Media L.L.C., New York.
Unlike life insurance companies, settlement firms cannot base underwriting decisions on the results of medical testing ordered for applicants, the underwriters said.
Life settlement firms rely mainly on what’s already on the record in medical tests and attending physician statements, and they are working with what on average is an older population, the underwriters said.
“Underwriters are not comfortable doing that,” said Linda Goodwin, medical director with Examination Management Services Inc., Scottsdale, Ariz.
Settlement underwriters have a limited idea of what their competitors are doing, because their statistics are based on the experience of an industry that is still young, said Charlotte Reed, medical director at 21st Services L.L.C., Minneapolis.
“Life insurers are much more communicative about what kind of life expectancies are generated by their data,” Reed said.
Although all major settlement underwriting firms recently increased their projected life expectancies, each one based its expectancy table on its own business model, said John Iacovino, medical director at Fasano Associates, Washington.
At least, he said, “regulators can’t say we’re price-fixing.”
A significant difference between settlement firms and life insurers is that carriers have a financial stake in the policies they issue, Fasano said.
“In life settlements, aggregators and intermediaries are not the funders,” Fasano said. “That produces larger disparities of opinion, where brokers often say estimated life expectancies are too long. That can create a bias toward being too short.”