Here is a great life settlement article we found in the San Diego Business Journal. Keep checking back at Life Settlement News for updated news on life settlements, premium financing, and the whole industry.
For a market that was nonexistent 10 years ago, the idea of life settlements has turned into a booming billion-dollar industry as well as a controversial issue that has seen pending state legislation and warnings from the insurance commissioner’s office.
Life insurance policy owners, either in need or want of money, can sell their policy to a third party for cash. Others choose to sell because they cannot afford the premiums.
Life Settlement Solutions Inc., a San Diego-based and institutionally funded life settlement company, has purchased $1 billion worth of life insurance policy mortality benefits in 47 states since it was founded five years ago.
“We kind of created the market,” said Larry Simon, chief executive officer, sole shareholder and founder of Life Settlement Solutions. “We were the first institution that funded (life settlement) transactions.”
Prior to 2000, the market really didn’t exist, he said.
Now, state officials like Sen. Mike Machado, D-Linden, have proposed amendments to related bills that would help protect seniors from Stranger-Originated Life Insurance (Stoli) or Speculator-Initiated Life Insurance (Spinlife) plans.
The insurance commissioner’s office, which does not have a public position, added a senior advisory Feb. 20 about Stoli or Spinlife life insurance schemes to its Web site.
Molly DeFrank, spokeswoman for the state Department of Insurance, said that they have received “virtually no complaints, we want to warn seniors about the possibility of being victimized …”
The average policy peddler at Life Settlement Solutions is 75 years old, not in need of the money and has an average policy in excess of $3 million — a standard snapshot of the rest of the industry, according to Simon.
The policy owner may make the decision to sell death benefits to address changes in his or her current financial situation, such as selling the family business or moving the kids out of the house.
“They don’t need as much insurance,” Simon said. “Or they may be tired of paying the premiums.”
About 50 percent of policy owners who sell to Life Settlement Solutions decide to sell only a portion of their policy, according to Simon.
The market is estimated as a $50 billion to $100 billion industry, according to the Life Settlement Solutions Web site.
Steve Washington, the managing director of business development at Hudson, Ohio-based Life Equity LLC, puts the market a bit lower.
He estimates that it was “just north of $10 million” in 2007, regardless of widespread estimates of $15 million for last year.
“It’s really an industry that’s in its infancy,” Washington said.
Executives at Life Equity, which was founded in 2000 and currently employs 70 people, opened the Life Settlement Institute about five years ago. The nonprofit works to establish regulations in the 20 or so states that do not have life settlement acts.
Both Washington and Simon predict “significant growth” for their respective companies.
Source: Jaimy Lee
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