The life settlement business has been set back by the recession, but a number of factors are pointing to growth opportunities, according to settlement brokers speaking on at panel at the recent Life Settlement Summit in Miami.
More educated buyers and more realistic life expectancies are helping to create a demand for “quality paper,” said Mike Liebowitz, president and chief executive officer, Invescor Ltd., Farmington Hills, Mich. In addition, projected returns on settlement investments “are starting to be more realistic,” he said. “Buyers are coming back.”
Russel Dorsett, co-managing director of Select Life Corporation and director, Veris Settlement Partners, Rockville, Md., said the market “is coming back into balance. In 2009, there was a lot of paper and not enough buyers. Now we are rejecting three of five policies, so that’s improving.”
Rob Haynie, managing director, Life Insurance Settlements Inc. Fort Lauderdale, Fla., agreed there has been a recent rise in interest among buyers.
“There is more competitive bidding now than 12 months ago,” he said. “Capital is coming back now.”
But capital is looking for improved life expectancy projections, he said.
Jon B. Mendelsohn, president and chief executive officer, Ashar Group L.L.C., Orlando, Fla., says the settlement industry has helped consumers generate $1 billion from their life policies.
“We have a tremendous amount of legitimate inventories,” said Mendelsohn.
Members of the panel felt that increasing regulation of the life settlement industry by the states has been largely good for the industry.
Liebowitz said that 41 states, with 85% to 90% of the nation’s population, have regulations covering life settlements. This has helped stabilize the industry, he said.
“The fact that regulation is pervasive is a good thing all around,” Dorsett agreed. “Providers that don’t play by the rules are finding fewer places to play at all. We providers have to educate consumers and producers.”
In heavily regulated states, such as Virginia and Vermont, there is virtually no settlement activity, noted Dorsett.
“Other places, such as California and New York, will be good place to work.”
He said that although the industry can live with most recent state legislation, “there are some off-the-wall proposals being discussed. We can’t let down our guard; bad regulation once passed tends to spread to other jurisdictions.”
Haynie cited estimates by the American Council of Life Insurers, Washington that a total of $20 trillion in life face value is in force in the U.S. Yet 97% is in policies that ultimately lapse or are surrendered, he said.
“We try to get consumers good value,” he said.
Haynie said he thinks the industry needs to keep its message to seniors short, sweet and positive. “Seniors get turned off if you start with a negative,” he observed.
More than half of life insurance agents have a potential of substantial new income from settlements, Liebowitz said. “Agents often call looking for help for a client,” he reported.
Momentum for settlements dropped off in 2008-2009, but Liebowitz reported he recently has been having more conversations with life broker dealers.
“We’re starting to see momentum again,” he said. “We need legitimate, clean paper.”
“We have zero tolerance for any paper that does not seem to have originated legitimately,” Mendelsohn said. “We’ve had a tremendous amount of interest. The settlement industry is getting back to basics. We have serious players.”
Liebowitz said the life insurance industry is pushing back against life settlements “because they (insurers) realize they need to change. This industry will succeed; they can’t stop it.”
There has been a significant increase in people over-age-65 buying policies because more of them know life settlement is an option, Liebowitz reported. The vast majority of those who sell policies use the money for living expenses, he said.
The Life Settlement Summit was sponsored by National Underwriter Life & Health and other Summit Business Media publications.