US-based industry group the Life Insurance Settlement Association (LISA) published its 2023 Market Data Collection Survey report in early May. The report, now in its third year, collects secondary market transaction data from the organisation’s life settlement provider members, which it says represents more than 95% of transactions in the secondary market overall.
The headline this year is that the life settlement market paid out more than $843m in the calendar year 2023 to US consumers who sold their life insurance policy, up from $790m last year, and $750m in 2022.
“The data collected by LISA in our Members Annual Market Data report evidences the societal benefit of our industry to the American consumer,” says Bryan Nicholson, Executive Director at LISA.
“LISA’s provider members buy policies from insureds across the US; it’s likely that portions of the $840m in liquidity that our industry realised for seniors last year circulated into their local communities,” he adds.
Another of the data points LISA collects relates to the additional dollars that life insurance policy sellers receive over and above the cash surrender value – the amount they would receive if they sold the policy back to the insurance carrier.
John Dallas, CEO at Berkshire Settlements and Chair of LISA, says that this information is as important as the headline number.
“The benefit that the life settlement industry offers to Americans can only really be understood when comparing the money received from a life settlement transaction to the cash surrender value of the policy. In 2023, this number was $707m, representing a six times multiple on average for those that sold their policy,” Dallas says.
LISA also tracks the number of transactions closed by its members in the secondary market as part of its annual data gathering initiative.
Last year, 3,213 deals were closed, up from 3,079 in the prior year. What’s notable here is that other consumer life markets are either stagnant or in retreat; the equity release market in the UK and reverse mortgage market in the US are feeling the effects of higher interest rates on demand for these solutions, something that doesn’t seem to be impacting the life settlement market.
LISA’s latest report comes on the heels of lobbying efforts that it hopes will provide additional fuel to accelerate what has been a growing market in the past few years.
In April, the organisation presented testimony to the Life Insurance & Planning Committee (LIPC) of the National Council of Insurance Legislators (NCOIL) at its spring meeting in April at that highlighted two areas where LISA would like to see changes to the regulatory regime: one relating to process, and one relating to awareness.
The process amendment LISA is seeking speaks to the expeditiousness – or lack thereof – of the current transaction process in the secondary market. It is requesting that NCOIL mandates carriers to allow electronic authorisations and implement a maximum 21-day turnaround for change of ownership requests.
“Because of their complexity and the substantial regulatory requirements attached to each transaction, the life settlement process is relatively slow. That is exacerbated by delays at the carrier level in obtaining basic necessary information, such as policy illustrations and verifications of coverage. These proposals, which directly impact the consumer experience, would simply codify what should be the norm in 2024,” says Nicholson.
It’s LISA’s second proposed amendment that would be a silver bullet for the life settlement industry, however. It wants to make prohibiting a life insurance producer or broker from disclosing to a client the availability of a life settlement contract unlawful.
Alan Buerger, Coventry First Co-Founder and Executive Chairman presented LISA’s proposal to NCOIL’s LPIC.
“This recognises that, in the 17 years since the model was last amended, there is a basic awareness among producers of the market and of the type of clients (senior owners of universal life policies) who, if they are considering surrender, might be able to access a better result in a life settlement transaction,” he says.
The American Council of Life Insurers (ACLI) apparently doesn’t agree that the model needs any adjusting.
Whit Corman, a spokesperson for the ACLI, told Life Risk News in an emailed statement that: “The model was heavily negotiated over a period of two years with input from insurers, producers, consumers, and the life settlement industry. Without evidence of harm to consumers, ACLI does not support renegotiating these provisions.”
NCOIL’s LPIC voted to reauthorise the current model for three more months, until NCOIL’s Summer Meeting in July, so until then, the status quo remains. For Dallas, however, LISA’s recent efforts serve to highlight what he says is a significant opportunity for the American consumer.
“The data that we collected in our Market Data report this year shows the benefit that our industry is bringing to the American senior,” he said. “That’s the bigger picture for the life settlement industry, and the amendments to NCOIL’s life settlements Model Act that we are proposing seek to further solidify this benefit by making transactions quicker and raising awareness.”
