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August 22, 2011 at 08:00 PM
On a recent Wednesday afternoon, I found myself sitting in a tidy, angular room in a restaurant at the Museum of Modern Art in midtown Manhattan. The steam from the subway and heat from the street had conspired to dishevel me and I was in stark contrast to the waitstaff, who, with their black suits and perfectly coiffed hair could best be described as a mix between Victorian butlers and runway models. As I tried my best to feign comprehension of some of the minimalist pieces that hung from the walls, I made small talk with some fellow journalists. We were attending an event described as a “life settlements 101″ course. It was held by Coventry, a leading company in the secondary insurance market, and was something I was interested in since my understanding of the secondary market is not as deep as I would like it to be.
It was explained to me that Coventry found the restaurant at the Museum of Modern Art to be an appropriate place for the lunch because some people in the art establishment look down on modern art because it deviates from classical tenets, and that is how people in the secondary market feel the life insurance establishment views their business. Because it approaches life insurance from such a fundamentally different angle, the logic goes, the secondary market is often misunderstood.
One thing that I did know about life settlements was that they were a point of contention within the life industry and I was well aware that my “life settlements 101″ course was only going to explain one particular point of view. So, with a mix of cynicism, interest and open mindedness, I enjoyed a pleasant meal while Alan H. Buerger, co-founder and CEO of Coventry, spoke about his industry.
I decided that I would get the most out of this event if I ditched any preconceived notions I had for or against the secondary market and listen as if I had no prior information on life settlements or life insurance, but as a customer, was looking to enter the market. After all, if life insurers want to sell to my generation, so will life settlement companies, eventually.
Buerger made a strong case, indeed. He spoke of monopsony, a market form in which only one buyer faces many sellers. The seller has a poor negotiating position in such a market, and it seemed that life settlement companies were doing a service; giving people who wanted or needed to sell their life insurance policies another option besides selling them back to the carrier. It was explained to me that legally, a life insurance policy is like any other property, such as a car or a home, that can be sold for however much profit it will bring. And while this may be great for policyholders, I had to remind myself that life settlement companies are not on a crusade to restore balance to the life market so much as they are on a mission to make a profit off of how life insurance is priced and performs.
