An alternate option for your client

[DerekW.]

I work for Milestone Providers, LLC. We are a life settlement provider located in Pennsylvania. A life settlement can serve as a viable option for many of your clients. I would like to educate agents on the life settlement process so they they can accurately present this option to clients that would benefit from it.

There are many different reasons for pursuing a life settlement. It more than often is the best possible option for a client who is going to let a policy lapse.
In this scenario your client can either

A.) Let the policy lapse and receive nothing in return for the years of premiums they have been paying.
(You, the agent, also stop receiving any commission.)

B.) take the cash surrender value from the insurance carrier and receive a small lump sum for their policy.
( You, the agent, also stop receiving any commission.)

C.) pursue a life settlement. With a life settlement the client will receive a lump sum that is typically double or triple the cash surrender value offered by the insurance carrier.
(You, the agent, will receive a commission in the life settlement transaction as well.)

With Milestone, all life settlement transactions are transparent. We require full disclosure on each and every transaction. I would love to discuss the process in further detail.

- Derek

 

[lifesettlementadvisor]

Derek...what is your position with Milestone? Do you recommend agents use a broker to get multiple bids or go straight to your firm and only receive your bid?

you forgot to mention a couple of options for the lapsing policy pitch. Agents also remember that convertible term insurance makes a great life settlement. This gives you the option to revisit your old clients who have term. With this you will make a commission on converting the policy, continued residuals, and a commission on the life settlement. Finally if you do have a client with a policy that is going to lapse, but they do not want to sell it, then they can do premium financing for the case. Also there is a provider out of Florida that will do a semi life settlement. This guy basically agrees to pay the premiums (but the policy is still owned by senior) and at death he splits the death benefit with the family.

 

[Ami]

I'd be interested in your respective takes on the matter of insurable interest in "life settlements". The traditional view of insurable interest is as an interest in the financial value of continuation of life. As it appears to me, the interest of investors in life settlements is the exact opposite - termination of life (ie the sooner that the insured life terminates the greater the IRR... and the proceeds are also receivable sooner).

In pricing of life products, actuaries also take anticipated pre-claim lapses into account. Life settlements throw a monkey wrench into the works.

Also, to quote form the earlier posting: "...convertible term insurance makes a great life settlement. This gives you the option to revisit your old clients who have term."

Now, with the above in mind, actuaries have to consider loading term premiums with a factor for "conversions for life settlements".

In the above, the question is whether those consumers who are purchasing life insurance cover for traditional purposes will be facing higher premium costs than if life settlements didn't exist. In other words, are consumers who are purchasing life coverage for traditional purposes going to eventually be subsidizing the life settlements business?

 

[lifesettlementadvisor]

I'd be interested in your respective takes on the matter of insurable interest in "life settlements". The traditional view of insurable interest is as an interest in the financial value of continuation of life. As it appears to me, the interest of investors in life settlements is the exact opposite - termination of life (ie the sooner that the insured life terminates the greater the IRR... and the proceeds are also receivable sooner).

Insurable interest has always been the hot topic in the life settlement space. Most people in this market (and the supreme court) believe that insurable interest must be present when the policy is first issued. This was first taken to the supreme court in 1911. The ruling held up that the policy is an asset and can be sold. Also stating that there is no violation of insurable interest. You are correct, the sooner a person dies, the higher an IRR for the investor. Each investment group decides what type of IRR they want to shot for. This determines what type of policies and le ranges they purchase.

In pricing of life products, actuaries also take anticipated pre-claim lapses into account. Life settlements throw a monkey wrench into the works.

Yes the market does affect the pricing of new policies. It is estimated that over 80% of all life policies lapse. This is a huge upside to the carrier. But when you approach a client, would you rather tell them that they can get the policy for a cheaper rate, but if they decide it is unneccesary, than there is little they can do to recoupe their investment? Or would you like to tell them that the policy will cost a bit more, but down the road there will be someone that will purchase the policy for 5 times the CSV?

Also, to quote form the earlier posting: "...convertible term insurance makes a great life settlement. This gives you the option to revisit your old clients who have term."

Now, with the above in mind, actuaries have to consider loading term premiums with a factor for "conversions for life settlements".

Yes they do, term conversions make up a large portion of the life settlement market.

In the above, the question is whether those consumers who are purchasing life insurance cover for traditional purposes will be facing higher premium costs than if life settlements didn't exist. In other words, are consumers who are purchasing life coverage for traditional purposes going to eventually be subsidizing the life settlements business?

As the life settlement market continues to develop, it will have a stronger role in the premiums of new policies. This has not yet been put into play, but as more and more policies mature, carriers will take notice. While many people think the market will eventually go away, life settlements are here to stay. In 2007 the market spent about 12billion in purchasing policies. This substantial number shows that there are plenty of seniors that sees a value in the market.

 

[Ami]

lifesettlementadvisor, thanks for your prompt, candid and logical response. Much appreciated.

 

[lifesettlementadvisor]

of course.
so what is your role with milestone? are you a sales agent or on the operation side? how many cases have you completed?

 

[Ami]

of course.
so what is your role with milestone? are you a sales agent or on the operation side? how many cases have you completed?

lifesettlementadvisor, If your question is addressed to me, I'm not involved in sales of life settlements or otherwise. I am, however, involved on a full time basis in R&D.

BTW, further to the earlier, as it appears that life settlements are here to stay at least for the foreseeable future, insurers (subject to legality thereof in the various jurisdictions) may wish to consider "transferability" as a contractual provision.

In other words, have life products that are "transferable" (incl. assignments, etc.) and life products that are "non-transferable". The "non-transferable" products would continue to be factored traditionally for pre-claim lapse whereas the "transferable" products would be priced either w/o lapse factoring or with a less significant lapse factoring.

Under that scenario, consumers would have the option to purchase a contract that could potentially be "sold" in a life settlement transaction or to purchase a contract that would lack that provision but which would bear a lower premium. In a sense, somewhat akin to "convertible" and "non-convertible".

...just a thought... to "let the goat be satiated while keeping the grass green" (to accommodate both)...

 

[lifesettlementadvisor]

lifesettlementadvisor, If your question is addressed to me, I'm not involved in sales of life settlements or otherwise. I am, however, involved on a full time basis in R&D.

No, sorry it was for Derek.

While Milestone is a great provider, its always easy to tell when they hire a new sales rep. First thing is that they hit forums, linkedin, and then call on the guys with life settlement licenses.

 

[DerekW.]

LifeSettlementAdvisor,

I apologize for the tardy response. I have been in and out of the office a lot lately. To answer your questions, I work on the inside sales team here at Milestone. We have on average 30-40 policies a day submitted to us for evaluation.

In regards to your question about working directly with us or going through brokers, it all depends. A lot of the times agents are hesitant to order LE's or medical records. If they are able to do so, then we feel it is best to work directly with the agent. This leaves more money for the agent and their client. Brokers can be advantageous in the process because they often will provide LE's or medical records and can speed up the process. However, we do not recommend that the case be shopped out to multiple brokers. It can become very difficult to determine who actually controls a case when you see it coming from multiple sources.

 

[lifesettlementadvisor]

LifeSettlementAdvisor,

I apologize for the tardy response. I have been in and out of the office a lot lately. To answer your questions, I work on the inside sales team here at Milestone. We have on average 30-40 policies a day submitted to us for evaluation.

In regards to your question about working directly with us or going through brokers, it all depends. A lot of the times agents are hesitant to order LE's or medical records. If they are able to do so, then we feel it is best to work directly with the agent. This leaves more money for the agent and their client. Brokers can be advantageous in the process because they often will provide LE's or medical records and can speed up the process. However, we do not recommend that the case be shopped out to multiple brokers. It can become very difficult to determine who actually controls a case when you see it coming from multiple sources.

Derek:

I agree that multiple brokers will devalue a policy. But I disagree with the rest. While there are some shady brokers that will take advantage of weak agents, most don't. If agents go directly to Milestone or Coventry, than they are probably not going to any other providers to receive bids. As I'm sure you know, it is a rare case that closes for the original bid. Without the broker (even with his cut of the money) the case will not receive competitive offers!