WASHINGTON–A long-time consultant to life insurers says the major problem insurance underwriters have with the life settlement industry is that they fear that life settlement advisers are “gaming the system” by not telling underwriters upfront that an outsider is involved.

“The number 1 issue life underwriters have with life settlement advisors is at the point of application,” said A. James DeHayes, chairman of DeHayes Consulting Group, Roseville, Calif.

He made his comments in a talk at the 6th Annual Life Settlements Conference sponsored by Fasano Associates, Washington, D.C.

To ensure credibility with underwriters, “there has to be full medical disclosure, with the possibility that there will be a life settlement attached to it,” DeHayes explained. “When you game the system, you are creating a transaction that has the potential not only for fraud but is also very negative both for the consumer and the industry.”

He said that “long term, settlements have great value” because they “give people options that they wouldn’t have otherwise.”

But “they need to be considered openly with the right education,” he added.

DeHayes pointed out that he is a marketing and sales consultant to a number of large insurance companies.

“As a component of the life insurance industry, I am creating somewhat of an opening by meeting and talking with people on the other side of the aisle,” he said. “I appreciate their candor [i.e., people in the life settlement industry], and I hope that we continue that as we make this a more viable option for consumers.”

DeHayes said that he formerly had a negative view of the life settlement industry “until I started looking at what really happens to an individual who makes a decision to sell, and I recognized that you are doing some great things.”

To gain the credibility of the insurance industry life settlement advisers must assure underwriters that “you want the life insurance business to grow, that it is ultimately your manufacturer,” he said.

To ensure the credibility of the underwriter, “the life settlement adviser must make clear that you want the life insurance business to be vital in the U.S. and that you have the public interest at heart,” DeHayes said.