Life settlement policy tracking and servicing has long been treated as an afterthought while focus is instead directed to policy sales, portfolio aggregation and even regulatory compliance.
However, tracking and servicing follows clients from the moment they are handed over by their agent for, literally, the rest of their lives. Servicing and tracking teams will actually have far more contact with the insured than their principle agent or other financial advisors, and it is this contact and hand-holding which is proving to be of interest to the sophisticated hedge fund and portfolio managers who are taking a more prominent role in the industry. This lesser-known part of the industry ("Is the life settlement industry dying?") is getting attention because long-term yields can be positively impacted by smart servicing and accurate tracking.
The best policy servicing begins even before a policy is bought. By establishing, up front, a positive relationship with each insured, a servicer is able to ensure that there is a clear understanding as it relates to frequency of contact and the necessity of maintaining up-to-date health care provider information. At the moment a policy is purchased, all of the responsibilities required to keep the policy in force until the death benefit is paid fall on the servicer. These specialized duties include paying premiums, monitoring the insured, updating medical records, revising life expectancies and calculating rates of return.
One of the key areas of servicing is called "premium optimization." With various types of policies available from so many different carriers, and with each carrier having its own set of rules and requirements, a servicer truly earns its fees by helping to calculate the minimum amount of premium dollars to keep policies in force. For example, cash value is of little value to a life settlement portfolio. A servicing company should ensure that policies are funded in a way that maintains the coverage but does not build the "savings" component of the policy. Other servicer contributions may include monitoring the portfolio for changes of insurance carrier ratings or of concentration risks, as some portfolios have minimum carrier rating requirements or maximum insurance company and disease limitations.
Because the timely payment of death claims is a key component of the life settlement yield equation, procedures must be in place to learn of a qualifying death and to file the death claim in an expeditious manner. Regular contact with the insureds through record requests and with genuine attention to the insured's well-being aid the process. In addition, the requirements for obtaining a death certificate vary by state, so a tracking company needs to be aware of the complex rules.
Life settlement policy servicing and tracking continues to grow in significance as the industry expands and grows even more sophisticated.
Brian J. Barclay is president and chief operating officer of Track-Life, LLC, based in Atlanta. The company offers a proprietary suite of services and software that enables portfolio managers to track, analyze and optimize life insurance policies held within a life insurance settlement portfolio. For more information, visit www.track-life.com or call 770-934-4390.
