 |
|
|
|
By Russ Patterson, CLU, ChFC, RHU, REBC, LUTCF Insurance brokerage agencies are in a prime position for growth and the life settlement industry is the catalyst. The life settlement industry has come a long way since its inception in the late 1990s – maturing into the growth stage of its market lifecycle. As the Baby Boomer generation enters retirement, many will be looking for financial solutions, such as life settlements. By 2030, 72 million people aged 65 and over will own $800 billion in life insurance – $161 billion of which will be eligible for life settlements, according to Bernstein Research. The industry’s increasing sophistication will also help it grow. Major trade organizations including the Association for Advanced Life Underwriting (AALU), The Million Dollar Round Table (MDRT), and The National Association of Independent Life Brokerage Agencies (NAILBA), to name a few, have presented forums discussing the topic. Industry professionals are closely monitoring standards set by the National Association of Insurance Commissioners (NAIC), National Association of Securities Dealers (NASD), and Financial Accounting Standards Board (FASB). The increased state-by-state regulation of life settlements has made them more attractive to institutional investors, which results in greater value to the client. Insurance carriers are seeking new distribution channels, which is another factor that should make the life settlement industry attractive to agencies. Many are seeking to add life insurance to their product lines to diversify and decrease risk. Agencies that offer the widest scope of products, including life insurance and related financial service products, such as life settlements, have a competitive advantage making them the most attractive option for carriers looking to diversify. Financial service professionals are also looking for ways to meet their clients’ growing needs. Using life settlements has proven to be a unique way to unlock a hidden asset for seniors in need. The following are some situations in which a life settlement may be appropriate for a senior client: • When medical or long-term care is required. • When financial hardships are present. • When premiums become unaffordable. • When changes to the estate plan occur. • When an executive retires. • When there is death or divorce of a spouse. As more and more financial service professionals look to life settlements to help meet their clients’ growing needs, there will be an increasing demand for agencies that offer life settlement brokering services. The following chart shows four actual insurance brokerage agencies that have added life settlements to their product line. The data shows gross face amount totals for the past three years, as well as the number of employees, the number of years doing life settlements, other product lines offered, and the number of life settlement cases submitted. Getting started in the life settlement industry is easy for insurance brokerage agencies. The perfect source for life settlement candidates is in your existing distribution channels of agents and brokers who have established relationships with senior clients. The following are some important steps to take to get involved in life settlements: Get Licensed Life settlements are regulated in 27 states (Ala, Ark, Colo., Conn., Fla., Ga., Ind., Iowa, Kan., Ky., La., Maine, Md., Miss,, Mont., Neb., Nev., N.J., N.C., N.D., Ohio, Okla., Penn., Tenn., Texas, Utah, Va.) and Puerto Rico. Legislation is pending in the District of Columbia. However, the following states are expected to propose life legislation in the upcoming legislative session (Ala., Ariz., Calif., Ill., Mass., Mich., Minn., Mo., N.H., N.M., Ore., N.Y., R.I., S.C., Wash., W.V., and Wis.). Laws and regulations generally outline licensing requirements, fees, continuing education, and model behavior. To learn more visit the NAIC at www.naic.org or www.MapleLifeFinancial.com. Understand the Bidding Process The success of the life settlement industry is tied to its fair market valuation process. Like other industries in which price is the primary competitive factor, companies that issue the best offers are usually most competitive. However, the highest life settlement offer may not be the best offer. Shortcuts can be taken in other industries to maintain competitive pricing. But, they should be viewed with caution or avoided in the life settlement industry. Because of the growing number of companies entering the life settlement industry, it’s easy to generate a long list of offers quickly, but understanding the companies behind those offers should be the primary concern. Partner with Professionals Before engaging in the transaction process, there should be proper due diligence of the various life settlement companies. A good place to start is the Life Insurance Settlement Association (LISA) at www.lisassociation.org. Here are some questions to consider: |
|