One witness who appeared Wednesday at a life settlement hearing focused on issues of concern to life settlement investors.
Most of the witness at the hearing, which was organized by the Senate Special Committee on Aging, focused on topics involving protection of insureds, such as fee disclosures and the dangers of participating in stranger-originated life insurance transactions.
Fred Joseph, the Colorado securities commission and president of the North American Securities Administrators Association Inc., Washington, talked instead about the risks facing unsophisticated individuals who invest in life settlement programs.
One problem plaguing the life settlement industry has been Ponzi schemes, set up in such a way that the organizers buy no settled policies, Joseph said, according to the written version of his testimony.
Other dangers include use of “fraudulent life expectancy evaluations prepared by captive physicians, inadequate premium reserves that increase investor costs, and false promises of large profits with minimal risk,” Joseph said.
In other cases, providers have concealed information about material factors such as the fact that rates of return can vary significantly, depending upon the accuracy of life expectancy calculations, Joseph said.