Life Settlements

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Sep 16, 2008 6:28 pm

Curious...I'm a life settlement provider. How many of you are able to align your clients and alliance professionals with this tool? Any friction from BDs, your primary carriers, etc.

Sep 16, 2008 6:47 pm

From what I know, some indy B/Ds will allow their reps to assist clients in life settlements.  Personally, I don't know of a single client of mine who would want a 3rd party benefitting from them dying as soon as possible.

 
As a life insurance agent, life settlements and other stranger-owned LI transactions are troubling.  Insurance companies count on a certain amount of lapses when pricing policies.  If lapse rates are to decrease, prices for policies go up.  This is despite mortality tables being extended to age 121. 
 
On the surface, they may seem like a good deal, but when you dig a little deeper, the whole situation stinks to high hell.
 
So, when you tell a client who is selling their policy that a 3rd party just painted a big fucking target on their backs, how do they react?
Sep 16, 2008 8:08 pm

ma,  so many financial problems are caused by looking at what is best in the short run and ignoring the long run.  The life settlements industry is a prime example of this. 


In the short run, life settlements can benefit some families.   In the long run, life settlements screw with both insurable interest and with lapse ratios.  Screw with insurable interest and you're screwing with the taxation of life insurance death benefits.  Screw with lapse ratios and you screw with everyone.  Lower lapse ratios mean more death claims which mean higher premiums for everyone. 
 
Lower than expected lapse ratios is a big reason for the price increases with LTCi.  It could certainly happen with life insurance if life settlements stop policies from lapsing.
 
As for that big target that Deekay mentions, it will happen.
 
Sep 16, 2008 11:04 pm

Ma,

Just because a client gets money from something doesn't make it beneficial

Sep 17, 2008 3:30 pm

SonnyClips,


Can you name one time that someone died a natural death after selling their policy?  I can't.    It doesn't mean that it hasn't happened and it certainly doesn't mean that it won't happen in the future.


 
What we know to be true is the following:
1) If one sells their policy, somebody else has a financial incentive to see that person dead.
2) We can't guarantee that a criminal or criminal enterprise won't become the owner of our client's policy.
3) We can't tell the client that there will be a target on their back.  We probably should tell the client that the possibility does exist. 
4) We know that life settlements are bad for the industry.
Sep 17, 2008 3:35 pm
SonnyClips:
deekay:

From what I know, some indy B/Ds will allow their reps to assist clients in life settlements.  Personally, I don't know of a single client of mine who would want a 3rd party benefitting from them dying as soon as possible.

 

As a life insurance agent, life settlements and other stranger-owned LI transactions are troubling.  Insurance companies count on a certain amount of lapses when pricing policies.  If lapse rates are to decrease, prices for policies go up.  This is despite mortality tables being extended to age 121. 

 

On the surface, they may seem like a good deal, but when you dig a little deeper, the whole situation stinks to high hell.

 

So, when you tell a client who is selling their policy that a 3rd party just painted a big fucking target on their backs, how do they react?



Stupid. Why would you lie to a client and tell them that they have a target on their back? Name ONE time that someone has been murdered after selling their policy to a pool of policies. Too bad the Series 7 can't weed out the fools.

 
Bobby, I can't prove it.  Just like you can't prove that it hasn't happened.  All I know is that, in a life settlement, someone will benefit financially from another dying as soon as possible.  If I sold my life insurance policy, I'd be looking over both shoulders constantly. 
Sep 17, 2008 11:30 pm

YAAAAAY VA

 
BY DANNY NEW SHOOS
Sep 18, 2008 5:54 am

"Someone has an interest in the death of the insured in EVERY LI policy."

 
Correct.  The question isn't about having an interest in seeing you die.  It is about benefitting from your death and not caring that you are dead and a willingness to have someone killed.  This is why the concept of insurable interest is so critical and why life insurance companies limit the amount of coverage that one can get.    
 
When you own a policy, you control who will benefit from your death.  My wife will benefit.  Some charities will benefit.  The charities don't know that they will benefit.   My wife won't kill me for the life insurance because she's not a crook, she doesn't want to see me dead, and she doesn't benefit from my death because she loses all of my future paychecks.  
 
On the other hand, if Tony Soprano could find a way to benefit from having a life insurance policy on my life, my death would be pure profit and he'd be willing to have me killed.
 
 
Has Warren Buffet murdered anyone? He's got millions invested in these instruments.
I don't recall saying that only crooks would get involved.  For those buying the death benefits they are a legitimate investment that will give a fair rate of return.  However, this rate of return can be manipulated by helping people die early.  If a criminal enterprise could find a way to get involved in which they knew what individual(s) to kill so that they could benefit, would the do so? 
Of course, they could.  Are there safeguards to try to prevent this?  Yes.  Would you trust these safeguards completely?  No way. 
 
You are quite naive.
Are you sure that I'm the one being naive on this one?
 
Anyway, this whole "target on the back" thing is purely secondary to the fact that life settlements are terrible for the industry which ultimately makes them bad for virtually everyone.