Krasner Life Settlement and Premium Finance

A little discussed aspect of the baby boomers’ known proclivity for spend-spend-spending and the resulting mountain of debt is the impact this may have on demand for life settlements in the future.

 

Therefore, Scott Willkomm’s reference to this relationship in a recent National Underwriter article was welcome. “The impairment of retirement and investment portfolios may accelerate the need for senior consumers to monetize illiquid financial assets,” writes Willkomm, who is chief executive officer of Mortality-Linked Products with J.G. Wentworth.

 

“For those consumers whose retirement assets are on the fringes of adequacy, the sale of life insurance, unavailable a few years ago, is increasingly a legitimate strategy.” See his article here.

 

That is a point which needs to be brought to the attention of professionals in the retirement income industry. It is a point that regulators ought to consider too.

 

The retirement industry has lavished unlimited attention on the plight of debt-heavy baby boomers who are about to hit the shores of Social Security, Medicare and retirement living. Much of this attention focuses on the mid- to upper-income boomers.

 

The pundits regularly ask, how can advisors reposition existing assets to create a reliable lifetime income stream during retirement? But they pay little or no attention to whether using life settlements to supplement that income stream is feasible. They don’t even bring it up when discussing boomers who have inadequate traditional savings or investments but who may have existing life insurance left over from the days of family rearing and small business development.

 

At some point, such boomers will approach an age and life circumstance where life settlement might be an ideal solution, perhaps the only solution. The industry’s planning for that day should start now. Indeed, professional advisors and brokers should begin the education process well before retirement, so the concept will be familiar—“for the day when.”

 

On a related note, it was interesting to see that the minimum size of life settlement transactions may be declining. See our article on this here.

 

Should this trend continue, it will make settlement a viable option for a greater number of aging boomers than would otherwise be the case. We’re talking here about boomers who may have life policies in the range of 0,000 to perhaps 0,000. Such contracts have not traditionally been seen as good candidates for settlement, but as the industry perfects its acquisition and underwriting processes, this appears to be changing. That’s good news. By the time boomers are age 65 or 70, and should they “need” to sell their policies, there just may be a market for them.

 

As social and regulatory policymakers go about laying out parameters for the settlement business, they should be sure to check out this possibility with aging, Medicare and Medicaid experts. Having a thriving and professional life settlement business on board may turn out to be an important private sector support for this large and aging demographic.

 

[ To weigh in on this issue, just blog your comments below. ]

 

–Linda Koco, Managing Editor, e-Publications
National Underwriter Life & Health