Consumer Reform in Life Settlements: Fewer Intermediaries?

The provider receiving the policy, however, may have seen a broad change in their role through the years. The provider remains a funder representative and the purchaser of the policy, thereby shouldering the regulatory burden. But many providers have broadened their product offering in response to the changing need of their capital sources. Most providers have policy servicing operations, fund consulting and management services, and portfolio aggregation services, or they may coinvest with the funder. Others have a narrower service offering, primarily screening policy submissions, forwarding them to the funder for pricing, communicating offers to brokers and smoothing the progress of closing contracting. It is not uncommon for both a broker and a provider to be working directly with the same funding source– the provider working with the funder in the 38 states putting regulations into effect and with the broker in the remaining unregulated states.

Perhaps the evolution of provider services demonstrates that different classes of capital sources have differing support needs, and some simply seek access to sellers. Has the industry reached another turning point, where the sophistication of certain qualified funders should allow interacting with a broker directly? Would the broker be able to keep his duty to the seller?

A quick glance at the broker dealer environment would suggest this structure is indeed possible. Such an arrangement could reduce the number of intermediaries in the sales process, possibly reducing selling costs for both the seller and the buyer. Shorter sales cycle times are a possibility, too, as the selling and buying parties' communications move closer together. Fewer intermediaries could ease the number of regulated entities, allowing regulators to focus on transactional improvements that benefit the consumer.

The life settlement market remains a valuable option for many policy owners whose needs have changed since the issuance of a policy. The selling consumer deserves broad access to as many qualified buyers as possible, with an efficient transaction and the transparency and protections afforded by regulation. Looking to the future, with a consumer benefit focus, could a single brokerage intermediary be the next stage of the life settlement market's evolution?!

Cyndi Poveda is vice president of the Secondary Markets Solution Center of Crump Life Insurance Services, Cleveland. She can be reached at [email protected].

Fewer intermediaries could ease the number of regulated entities, allowing regulators to focus on transactional improvements that benefit the consumer.