More regulatory scrutiny, higher consumer awareness and a return of buyers to the market are likely developments for the life settlement business this year, according to industry experts.
Doug Head, executive director of Life Insurance Settlement Association, Orlando, Fla., thinks the industry did well in the face of adverse publicity last year and is in position to make its case to more consumers in 2010.
"Given the challenges inflicted upon us in 2009 and the aggressive nature of some of our adversaries, we did well," says Head. "The inadequacy and inaccuracy of some of the information in the public realm was astounding. I'm looking forward to getting more accurate information to the general public. We continue to look to educate consumers."
Head continues to expect to see some regulatory battles ahead for the industry, with leftover issues from last year, when Congress held hearings on life settlements and the Securities and Exchange Commission opened an internal inquiry into industry practices.
Head says he expects a report on life settlements from the General Accounting Office this April will shed additional light on the industry. He is not sure whether that will be good or bad for the businesses. The report was ordered by the Senate Special Committee on Aging, headed by Sen. Herb Kohl (D., Wisc.).
"Kohl has the capacity to pocket the study or reject it," Head says of the report.
As for the industry, Head expects some movement toward acquiring and selling life policies with relatively smaller face values.
"But you see strange initiatives in some states that could almost cut small policies out of the marketplace," he says.
He cites a Vermont law passed in 2009 that strictly limits the amount of compensation a broker could get from a life settlement, so that a $100,000 policy, say, would return a commission of just $400.
