Market Analysis
Traditional Life Settlement Market
Transactions of this type have been available for Americans since 1911. Aite Group estimates that the life settlements industry will chart a middle course, recovering from a subpar 2009 to transact approximately $13 billion annually from 2010 to 2013…"2
Generally speaking, life settlements are an option for high-net-worth policy owners age 70 or older. Independent estimates report that among this group, over 50% of policies have a market value that exceeds the cash value offered by the carrier. Another study by Conning & Co. Research, "Life Settlements: Additional Pressure on Life Profits." This study found that senior citizens owned approximately $500 billion worth of life insurance in 2003, of which $100 billion was owned by seniors eligible for life settlements.3
A growing number of experts now believe that informing clients about offering life settlements should fall under the fiduciary duty of a financial adviser. However, FINRA cautions the consumer, “Life settlements can be a valuable source of liquidity for people who would otherwise surrender their policies or allow them to lapse—or for people whose life insurance needs have changed. But they are not for everyone.” 4 With this being said, those established in the industry are now placing an emphasis on life settlement education for financial professionals so that they can accurately present the life settlement option to all clients who might benefit from it.
Life Settlement Benefits to Consumer
A study of the potential of the life settlement market was conducted in 2002 by the University of Pennsylvania business school, the Wharton School. The research papers, credited to Neil Doherty and Hal Singer, were released under the title "The Benefits of a Secondary Market For Life Insurance." 5. Pursuant to this study, which was conducted in 2002 during the very early stage of the life settlement market, life settlement providers had paid approximately $240 million to consumers for their unneeded life insurance policies, an opportunity that was not available to them just a few years earlier. Today, consumers in the United States have received billions of dollars because of the existence of the life settlement market
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