Life Settlements Insurance for Senior Citizens in America

Life Settlements Insurance for Senior Citizens in America

The NYSID has quite recently proposed legislation to regulate life settlements.  Superintendent Dinallo stated:  “In these times of economic uncertainty, there is strong pressure on people pressed for cash to sell valuable assets, such as life insurance policies.  This bill protects consumers by establishing a transparent marketplace with specific licensing, registration and disclosure requirements.”

If reinforcement of the need for such legislation were needed, Jason M Breslow of Bloomberg.com is reporting in an [article] today that prices on policies are falling as more senior citizens turn to their life insurance policies as a salable asset to get them through these hard times.  The lead in Mr. Breslow’s story is “Retirees seeking extra cash last year could sell a $5 million life insurance policy to investors for $1 million.  Today, the price is as low as $600,000.”  A number of factors are at work in falling prices, but an increasing supply of policies for sale is one.  Breslow quotes Brian Pardo, Chairman of Life Partners Holdings of Waco, Texas as saying:  “Senior citizens ‘are really seriously in financial trouble’ with no real way to raise cash besides selling assets that they may not want to part with at “garage-sale prices…We don’t have enough investment capital to buy all of that.”    It  is seriously troubling to me to think about seniors facing choices such as losing their home or selling a life policy they bought to leave for their beneficiaries.  I am glad life settlements have the attention of state regulators across the country!

In a section of Mr. Breslow’s article that exemplifies just how mercenary this industry has become, he reports that investors are now only interested in larger policies on older individuals with shorter life expectancies than just a year ago.  Of course, shorter life expectancies and older policyholders mean higher returns for the investor.  Remember though that these returns on investment accrue only upon the death of an individual – a real human being.  Someone’s parent or grandparent must die for these disinterested investors to get the 16 percent return that Breslow’s article reports is the current investor expectation! In today’s economy how many places can one get a 16 percent return? So more and more people elect to bet on someone else’s death to make money.  But they want a sure thing and with desperate policy owners forced to take “garage sale prices” for their policies they are getting their 16 percent this  year according to Doug Head, executive director of the Life Insurance Settlement Association in Orlando Florida.  Last year investors were satisfied with just 11% according to Head.

Why be satisfied with “just” 11% when more desperate senior citizens can be convinced to sacrifice their life insurance policies and  16% is possible?