A recent report published by asset manager Conning suggests that the life settlement industry is poised for continued growth in the coming years. Life Risk News’ Greg Winterton spoke to Rob Haynie, Managing Director at life settlements broker Life Insurance Settlements, Inc, to get his views on how the life settlement market has done in 2023 and what his expectations are for 2024.
GW: Rob, let’s start with 2023. At the end of last year, you told Life Risk News that you expected the main reasons why seniors look to sell their policies to be covering medical bills and simply not needing the policy anymore. Has that forecast proven correct? What about the cost of living crisis?
RH: Yes, the two main reasons you mention are the primary drivers of policy sales. It’s important to remember that the policies transacted in the intermediated market tend to carry a higher face value than the direct to consumer channel. The policies we bring to market tend to be associated with a wealthier socioeconomic group so while the cost of living crisis has contributed a little bit to deal flow, it’s not been a significant driver. Medical bills can get very expensive in the United States, and at the age cohorts we tend to work with, it’s frequently the case that the policy is no longer needed. I think those two reasons will remain the top two reasons why policies come to market because they’re not cyclical.
GW: Moving onto deal flow more generally. Again, last year, you said that you’d expect 2022 to end up higher than 2021. You were right. What’s your observation this year?
RH: Speaking for ourselves, we’ve seen increased activity in terms of the various different advisor groups coming to us looking to sell their client’s policy. Anecdotally, from conversations I’ve had with peers and clients, I’d say the industry should show growth again when the numbers for 2023 come out in late spring or early summer next year. How much growth though is hard to predict.
GW: Are you concerned that the increasing influence of the direct to consumer channel in the secondary market might take deal flow away from the intermediated market?
RH: No. Actually, DTC helps those of us in the intermediated market in terms of awareness. Remember that both the individual insured senior and their advisers are seeing TV commercials. Yes, that naturally leads to increased deal flow for the direct to consumer life settlement providers. But equally, many of the folks that are seeing these advertisements are then using that as a nudge to go away and do their own research. Often, that research includes contacting a trusted adviser like a life insurance agent, lawyer, or accountant, which then brings them to firms like ours. And the flip side is that those advisors proactively contact their clients to talk about life settlements. DTC is good for our industry overall.
GW: Changing gears a little bit. In the summer, you published a short podcast series. What was the driver of that decision? Will you do any more?
RH: Those who know me know that I’ve been beating the drum about awareness in the life settlement market for years. The podcast was – is – designed to be additive to the conversation. Lapse rates are still way, way too high. Not nearly enough life insurance policyowners understand the nuances of the life settlement market, and even more aren’t even aware that the life settlement option even exists. The more content out there that people might stumble upon, the merrier, in my view. And we might do some more. We will continue the podcast with 10 more episodes beginning in a few weeks. Our plan is to feature some of the best and brightest in the life settlement industry and get their unique perspectives and help educate the listener on the entirety of our marketplace and illuminate the value it brings to consumers.
GW: Lastly, Rob, looking ahead to 2024. Are there any hurdles on the road to growth that the life settlement market might have to negotiate next year?
RH: I think the main thing is the uncertainty around the macroeconomic environment. It’s difficult to tell whether we’re at the top of the current rising interest regime or not. Higher rates impact the ability of asset managers in the market to raise capital because of the relatively higher appeal of bonds, but that’s something out of their control. I prefer to focus on what we can control, which is to continue to work hard and keep educating the consumer and their advisors. There is a lot that we as an industry can do, regardless of the economic and social environment.
