On November 7 through 9, LISA, the Life Insurance Settlement Association, held its annual fall meeting in Orlando. Many topics of interest to life insurance producers, life settlement brokers, and life settlement investors were covered, but two key items stood out.
I. The biggest obstacle facing the life settlement industry today is the lack of consumer awareness.
Each day, elderly policyholders, ignorant of the option of a life settlement, are surrendering policies that might bring them significantly more value as a life settlement. Although a relatively new financial option, knowledge of life settlements has not filtered through to consumers the way you would expect. Producers, who traditionally look out for their clients’ best interests (and their own wallets, too) should be happy to spread the word. Yet many find themselves afraid to even mention life settlements to their clients as a result of rules handed down by their primary company or broker-dealer. That’s the bad news.
There is good news, however. Regulators are becoming aware of how senior citizens are being shortchanged by these practices and have passed or are considering legislation or regulation that would mandate the disclosure of the life settlement option to a policyholder considering the lapse or surrender of a policy. Disclosure has already been mandated in six states — Kentucky, Maine, New Hampshire, Oregon, Washington and Wisconsin — with more on the way.
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Additionally, the legal profession is becoming aware of this malfeasance as well. Lawyers are starting to initiate lawsuits against producers who have failed to disclose the life settlement option to their customers and insurance companies that are uncooperative with policyholders who are trying to settle their policies.
The life settlement industry is trying to educate consumers of this valuable option through awareness campaigns and by supporting legislation intended to apprise consumers of their right to investigate the life settlement value of a policy about to be lapsed or surrendered.
II. Investment money continues to find its way back into the industry.
It is no secret that in the past few years, the combination of a poor economy and changes to life expectancy methodology drastically decreased the amount of investment money making its way into life settlements. Since bottoming out about four years ago, investor interest has slowly, but steadily, increased, with the realization that life settlement investments offer the potential for very attractive returns in this low interest rate environment and are relatively uncorrelated to the stock market.