Senior life insurance settlements grew considerably in 2005, and much of the growth was fueled by more producers than ever embracing and offering settlements. Increased funding from Wall Street and overseas investors has created a strong demand for settlements, and producers are responding by marketing them to their senior clients with eligible policies.
The settlement providers also are answering the call by adopting some of the same promotional tactics that are employed by the insurance carriers. We are creating better marketing tools for producers to use with their clients and prospects, and these and other efforts by providers are enabling life agents who have forgone offering senior settlements quickly to make them an important and lucrative new element of their practice.
For the producers who have remained unwilling to offer life settlements, the most significant impediment has been a general lack of knowledge about the process of recommending and offering settlements to their clients and prospects. They believe that life settlements are best left to settlement brokers and providers who focus solely on these transactions. We also have heard from producers who believe that simply by offering settlements, they are discrediting the importance and value of the life policies that represent the core of their business.
This mindset begins to change after producers realize that the business has evolved considerably during the past several years. Now producers throughout the United States are focusing on offering both life policies and senior settlements to serve their clients better while earning new commissions in the process.
In fact, in 2004, the National Association of Insurance Commissioners adopted a model regulation enabling licensed life insurance agents to offer and broker life settlements without requiring an additional license as a settlement broker. As states adopt this regulation, they are paving the way for producers to act as settlement brokers for the benefit of their senior clients.
For producers who wish to begin offering life settlements, it is important that they work with a provider that offers the necessary tools and training to facilitate their success. Many large providers offer extensive training programs to prepare agents to respond to their clients' initial questions and concerns.
In addition to the training, producers also should expect to receive effective tools from their providers to introduce life settlements to their clients. Lead-generating letters, direct mail pieces, and advertisements are some of the items that providers offer to help producers succeed in life settlements. After agents become steady life settlement producers, providers will help them in additional ways, such as organizing and hosting seminars for new prospects who are interested in learning more.
My company has adopted an effective marketing tactic with our celebrity endorsement deal with Betty White, the immensely popular TV superstar from such shows as The Mary Tyler Moore Show and Golden Girls. The informational videos and material featuring Ms. White that we produced last year have become effective marketing tools, and her unique appeal is helping to overcome the initial skepticism that some seniors express when they first are presented with the concept.
Producers with large numbers of high-net-worth senior clients quickly will find that they have many strong candidates for life settlements among their existing client base. The insurance needs of these persons often change over time, and their advisers are in an ideal position to help them evaluate the use of a settlement and adjust their coverage to meet their current needs.
The 2001 CSO Mortality Table, which lowered life insurance premiums across the board with its greater life expectancy actuarial projections, has helped to create a new market for settlements among seniors whose insurance needs have changed. Coupled with the increased demand and funding for settlements from investors, the new rates stemming from the 2001 mortality table make it possible for seniors to sell their existing policies for sums that are considerably greater than their cash surrender values. The proceeds then can be used to obtain replacement insurance that better suits their needs at lower premiums than they formerly were paying.
For producers, this represents a win-win situation: The client benefits from the financial advantages of the settlement and new policy, and the producer earns commissions from both the settlement and the sale of the replacement policy.
In the past, the cost of replacement insurance might have precluded people from selling their existing policies, but now these same people might be able to "trade in" their policy for coverage that more effectively suits their needs at a lower premium.
For producers who do not benefit from a large pool of eligible policyholders in their current client base, it is wise to partner with other professionals who offer complementary services to high-net-worth persons. Estate or trust attorneys, accountants, and investment advisers are ideal business partners, for they often have large numbers of eligible policyholders as clients but are unable to offer and broker settlements because they lack the necessary license.
Many savvy settlement providers have found all of their leads through a handful of strategic alliances that they have forged with other professionals, and the practice is one of the most effective keys to success in life settlements.
In 2005, many settlement providers saw producers become a significant driving force behind the growth of life settlements. Some producers with many clients who are 65 and older with policies greater than $1 million are shifting their entire practices to focus more heavily on life settlements. They are finding that the demand for settlements has created a secondary market for policies that is stronger than ever before, and the lower rates for new coverage have made settlements a viable option for those who require replacement insurance.
As settlement offers continue to grow with the increased demand that is being fueled by Wall Street and international investors, we predict that life settlements will become an integral offering of most independent producers' practices. The market never has been more favorable for these transactions than it is today, and forward-thinking producers who constantly are in search of new opportunities for their clients are taking notice.
Wm. Scott Page is president and CEO of The Lifeline Program(R), a life settlement provider founded in 1989. Mr. Page is responsible for management, operations, and marketing. He served three elected terms as president of the National Viatical Association and led that organization's efforts to merge with the Viatical and Life Settlement Association.
