This year's spring Life Insurance Settlement Association (LISA) conference, which took place May 29-31 in Las Vegas, was, as always, interesting and informative. Here are a few highlights that illustrate why you should be paying attention to life settlements:
- Investment interest in life settlements continues to increase. This is great news for sellers trying to maximize the value of a policy they no longer want, need or can afford. Pension plans, in particular, find life settlements are a good match for their long-term investment horizons and their need for alternative investments not correlated with the stock and bond markets. For similar reasons, life settlements also have appeal to foundations and endowments. One new thought is that life settlements are a "socially responsible investment." That's because investing in life settlements permits seniors, who need money, to maximize the value of their life insurance.
- Texas is leading the way on Medicaid life settlements. The state is the first to pass legislation enabling life settlements to be part of the Medicaid eligibility process rather than requiring the surrender of the policy. The new law awaits Gov. Rick Perry's signature. Also, add New Jersey and California to the list of states considering such legislation. With Medicaid long-term care representing one of the largest single budget items for most states, these laws should be a no-brainer.
- Life settlements are beneficial; there's proof. Professor Narayan Naik of the London Business School presented a preview of his research paper on life settlements that was published on June 10th. The paper provides ample evidence that life settlements provide significant value to policy owners while at the same time proving to be an excellent investment for buyers.
- Small face policies continue to be an underserved market for life settlements. Investors continue to struggle with how to underwrite small face policies accurately, efficiently and economically. Once they do, this market will explode.
- Does a life settlement actually increase life expectancy? Life expectancy underwriters are increasingly taking into account what they call the "healthy-wealthy effect" that seems to impact their mortality assessments for insureds who participate in a life settlement transaction. Could the financial benefit provided by a life settlement and the resulting increase in well-being actually allow people to live longer?
The conference left no doubt the life settlement business is on the upswing and its future looks bright. As situations come up where insureds have policies they no longer need, want or can afford, a life settlement could be a source of "found" money. Remember, it can't hurt to try; it can only hurt not to.
For more from Robin S. Weinberger and Peter N. Katz:
