Four Life Settlement Trends to Watch in 2019

Kimberly MaturinoFrontpage Article, News

Despite experiencing setbacks and challenges over the last decade, the Life Settlements Industry looks to have finally returned to an upward trajectory. Since 2018, the volume of transactions in life settlement policies has increased dramatically, and this positive surge seems set to continue.

But with so many people still unaware they can liquidate their life policies greater public awareness is the need of the hour. Flexibility is key, too, with providers becoming innovators of new products and marketing techniques that could rock the settlements industry to the core.

Here are four life settlement trends to watch in 2019.

  1. Direct-to-Consumer Marketing

Back in the day, insurance providers’ and brokers’ focused mainly on building networks of financial advisors, attorneys specializing in estate planning, and wealth managers to help them pinpoint which clients could benefit from selling their life insurance policies.

More recently, the trend has been to market the idea directly to the public. This method has borne significant fruit for the industry and consumers are now much more aware of the option of selling their life insurance. The trend seems likely to continue in the next few years.

This represents good news for consumers too. Life settlement policies are a common asset that a lot of people simply presume they’re stuck with, but are now waking up to the fact that their policies can be a source of immediate cash. Some consumers might not want the policy anymore. Others may be no longer able to afford the premiums. Also, there will always be consumers looking to sell so that they can change to a different kind of policy.

2. Number of Qualified Policies is on the Rise

While there is an overall decline in the amount of policies out there, the volume of policies eligible for purchase is growing. Not only has the number increased, but the quality of policies in the market has increased too. There are several reasons for this;

Divorce rates are on the rise

People often name their spouse as a beneficiary in a policy. After divorce, there is no longer a need or a desire for this arrangement to continue. In some cases, the beneficiary can be changed, but in others it cannot. These latter clients will often choose to sell the policy and purchase a new one with the new release of cash.

Rising premium costs

Many seniors struggle to meet costs each month, and a rise in their premiums will often persuade them to sell. Some may sign up for a more affordable policy, while others use the money for their immediate needs. The fact that younger family members are often capable of taking care of themselves means that a lot of seniors will choose to sell their life insurance policy, and use that money to supplement their pensions.

An ever-expanding population of mature customers drives this trend. The number of people aged sixty-five and over was 42 million in 2012 and is predicted to rise until it reaches 70 million in 2030. The life settlement market is expected to rise with it.

Good pension funds

If a person already has a good pension fund and enough savings to leave their family a good inheritance, then a life insurance policy may be unnecessary. People in this position are choosing to sell their policies and invest the money in something that gives a better return.

Investing in the markets is becoming more popular

Just one decade ago, stocks and shares were a mystery to the majority and investing in the markets was the domain of relatively few people. Today’s consumers realize that it’s not as complicated as previously thought. Many are choosing to sell their life insurance to free-up funds for investments in the foreign exchange or stock markets.

Number of policies for purchase has increased

The increase in policies available to purchase can be traced back to the fact that brokers and life settlement providers now have a better understanding of the policies that are investor-qualified. This, along with growing consumer awareness makes for a genuinely lucrative trend.

It’s mandatory in several states that life insurance companies tell their customers about the life settlement market. Some states have proposed that life settlements should fund Medicaid, while others even go so far as to classify life insurance in conjunction with a Medicaid application as an asset.

3. Technological Advancements Improve Underwriting

Technological advances are affecting every industry. The financial services industry is no exception, not least because new technologies and data systems mean that transactions can be conducted far quicker.

Technology also allows for greater accuracy in the estimation of life expectancies. New, data-driven approaches rely on searching databases for patient prescriptions and clinical history. We can expect to see consumers wearing more devices like smartwatches and blood sugar monitors that will help the industry anticipate morbidity events.

Also, some start-ups are looking closely to Big Data and other predictive analysis methods to profile consumer’s health more accurately.

financial tools

4. Major Capital Returning to Life Settlement Markets

In 2018, two big life settlement investment funds raised close on $900 million. This growing stability in the life settlement industry is showing a marked increase in investor interest. Also, there are now more regulations in place to protect buyers and sellers of policies. The result is that major players have returned both consistent capital and expertise to the market.

As more and more investors see the advantages, capital will continue to flow into the market. This will fuel the increasing trend towards policy price and value causing more sellers to enter the market.

Finally, the industry as a whole is now better regulated and has gained access to a good flow of capital to fund policy purchases. Plus, it has a firm foundation of good business practice developed by advanced tech systems. Looking to the future, the life settlement industry is expected to continue a substantial level of sustainable growth.