Life Settlement Pioneer Sees a Bright Future Ahead

Low interest rates have hurt the profitability of older life insurance policies that insurers sold when rates were higher.

Some insurers are offering the policyholders “enhanced surrender value” options — cash — in an effort to get them to drop the policies.

The Life Insurance Settlement Association sees that as a kind of unlicensed settlement offer: It put a session on “defending the life settlement industry” on the agenda for its 27th annual conference, which ended Tuesday. The session focused on the enhanced cash surrender offers.

“These activities encroach on the regulatory frameworks that define the life settlement market,” LISA said in the description of the defense conference session. “LISA is actively engaged in efforts to mitigate this encroachment.”

But Alan Buerger, the chairman and co-founder of Coventry, said recently that he’s optimistic about the future of the life insurance policy resale market he helped create.

“The market is robust,” Buerger said. “I think this will continue for a long time.”

Reasons for Optimism

Buerger said that the supply of policies suitable for the life settlement continues to look strong and that plenty of institutional investors are interested in blocks of life settlement business, which tend to be resistant to ups and downs in stock prices and interest rates.

He also sees opportunities for life settlement firms like Coventry to cross-sell other products and services to life settlement candidates.

The main obstacle Buerger sees continues to be the difficulty of educating agents and consumers about the existence of life settlement options.

Some agents have concerns about efforts by companies like Coventry to advertise directly to consumers, and to buy policies directly with consumers. Buerger said Coventry began using the direct-to-consumer approach out of necessity, even though it would prefer to work with policyholders who have help from agents or advisors.