Life Settlements: Word is Out, Growth is Up
Efforts to raise awareness about life settlements are paying dividends. Life settlement contract transactions shot up by 47% in 2016, a new report from The Deal shows.
Growth comes as life settlement companies did more in 2016 to let seniors know that life settlements are an option to cash in on some of the value of a policy today and relieve the burden of paying monthly life insurance premiums.
"It's an asset like any other piece of property that seniors are starting to learn has value,” says Donna Horowitz, senior editor of the The Life Settlements Report. “Buyers are especially interested in small-face policies owned by average Americans and are reaching out to them more than ever before with TV ads and Internet marketing to let them know that it's been legal to sell their policies for more than 100 years."
Policy sales grew to 1,650 in 2016, up from 1,123 the year before. Total face value increased to $2.14 billion, up from $1.65 billion the prior year. The Deal’s data was compiled mainly from information obtained through public records requests to state insurance departments, and includes data from 31 providers.
Life insurers keep an eye on life settlements because they could raise costs for insurers: If fewer policyholders allow their life insurance contracts to expire, carriers have to pay out more in death benefits. If uptake of life settlements increases, insurers may also have to reprice premiums to factor in a lower policy lapse rate, making the products less attractive to consumers.
Word about life settlements is spreading. The Life Insurance Settlement Association says it started to focus on raising awareness three years ago. This year, the association used a combination of paid and non-paid media placements to share content or video on 3,500 websites and newspapers.
“We know traffic on our own web site has increased significantly this year. [Consumers] are likely contacting our members because of that,” says Darwin Bayston, CEO and president of LISA. He adds that the ongoing need for seniors to find new sources of net worth has also helped industry growth.
Several life settlement companies reported impressive growth figures for 2016. Coventry First led the market, buying 277 policies, up from 168 in 2015. The company paid $51 million and purchased $264.5 million in policies.
Magna Life Settlements and GWG Life tied for second, with 266 transactions each. Magna paid $159 million to purchase contracts with $501 million in face value, while GWG Life paid $61 million for $337 million in face value, according to The Deal’s report.
Life Equity was fourth, with 150 transactions, while Abacus Settlements was fifth, with 127 settlements. Abacus launched its first national TV campaign this year, airing segments across several news networks including Fox, CNN, MSNBC and Bloomberg. Those segments increased interest among consumers and agents.
Agents have contacted Abacus after their clients saw the advertisements on television and expressed “immediate interest” in pursuing a life settlement, says Scott Kirby, managing partner at Abacus Settlements. “It's difficult to quantify at this time, but we have learned that an increase in consumer awareness has a sort of ripple effect across multiple points of the industry.”
Coventry First has also done a lot of television advertising over the last couple of years, LISA’s Bayston says. He anticipates transactions will rise in 2017, as word about life settlement options continues spreading. “The more money spent on awareness, the more policies we’re going to see,” Bayston says.