Consumer confidence in the secondary market for life insurance is on the upswing.
According to a recent industry survey, life settlement transactions in 2016 increased by 47 percent over the previous year. Many industry professionals attribute the recent surge in settlement transactions to broader public awareness of life settlements as a sensible alternative to surrendering policies or allowing them to lapse.
Paid TV ads by several life settlement companies have also helped to educate policy owners that the secondary market for life insurance policies has provided many seniors with a source of hidden cash to help with retirement expenses and medical bills.
Another contributing factor for the increased level of participation in the market is the fact that state regulatory initiatives have created a comfort level for seniors who have a greater sense of confidence that the industry has sufficient governmental oversight.
Life settlement transactions are currently regulated in 42 states and the territory of Puerto Rico, affording approximately 90% of the U. S. population protection under comprehensive life settlement laws and regulations. Some states (including Florida) specify that life settlement brokers have a “fiduciary duty” to act in the policy seller’s best interests when brokering the transaction in the secondary market in pursuit of the highest possible offer.
Other regulatory initiatives that help boost consumer confidence involve “consumer disclosure laws.” In 2010, the National Conference of Insurance Legislators (NCOIL) unanimously passed the Life Insurance Consumer Disclosure Model Act as a guide for state legislatures to follow in order to help educate policy owners about their options. Since the passage of NCOIL’s Model, numerous states have explored the issue and eight states have passed some form of consumer disclosure, including California, Georgia, Kentucky, Maine, New Hampshire, Oregon, Washington, and Wisconsin.
As aging seniors advance into their retirement years and begin to experience health issues, the costs of medical treatment and long-term care expenses take center stage as they seek solutions to finance their care. The ability to sell one’s unwanted life insurance policy for an amount far greater than the cash surrender value becomes an attractive option.
According to the Life Insurance Settlement Association (LISA), the secondary market for life insurance continues to expand because it provides a valuable alternative for senior policy owners who want to maximize the and monetize the value of policies that are no longer needed for their original purpose.
The following statistics published by LISA estimate the size of the market and support the argument that senior consumers are well-served by the secondary market for life insurance:
- $2.86 trillion – The estimated face value of life Insurance in-force held by insured 65 years or older. (2015 latest data)
- $143 billion – The estimated value of life Insurance lapsed annually by insured 65 years or older. (2015 latest data)
- $ 211.7 billion – The estimated value of life Insurance in-force held by Florida seniors 65 years or older. (2015 latest data)
- $10.6 billion – The estimated value of life Insurance lapsed annually by Florida seniors 65 years or older. (2015 latest data)
- 90% of seniors who lapsed a policy would have considered a life settlement had they know of the option (ISI, 2010)
- 79% of clients feel advisors should inform them about a life settlement (ICR Life Insurance Study, 2012)
- 49% of advisors cited lack of knowledge as reason for not recommending life settlement to clients (ISI, 2010)
We encourage senior consumers to do their research before engaging a life settlement company to sell their policies. It’s important to understand that life settlement brokers typically receive a commission based on a percentage amount of the policy’s purchase price.
But at Trust Life Settlements, we believe it’s important to offer policy seller’s a flat-fee service (for those policies that meet our qualifying parameters), that ultimately puts more money into their pockets, by reducing the commission paid to the third party intermediaries who broker the transactions.
If you are curious whether your life insurance policy qualifies for our flat-fee service, contact our office at 800-216-2513. We’ll be happy to provide a free policy analysis and explore your options available to you in the secondary market.