The life settlement industry is expected to benefit from favorable demographic trends and technology innovations that will make it easier for consumers to sell their life insurance policies, according to featured speakers today at The Life Insurance Settlement Association (LISA)’s Eighth Annual Life Settlement Institutional Investor Conference.
The event, which is the leading professional gathering of institutional investors in the life settlement asset class, was held at The Ritz-Carlton Battery Park in New York City.
“Life settlements are a core part of financial planning strategies today because they provide tremendous value for appropriate consumers,” said Colin Devine, a veteran of the life insurance industry and consultant to both the insurance and investment management sectors. “Given our demographic trends, this business is only going to get better in the years ahead.”
In his opening keynote address, Devine observed that medical costs are a leading cause of personal bankruptcies, forcing seniors to evaluate all possible assets that may provide them with liquidity to deal with rising health care bills. “Life settlements are a very legitimate way to provide value to consumers who are struggling with older age health care costs,” said Devine.
Devine also set the stage for additional discussion throughout the day regarding significant technological innovations underway in the industry that have the potential to fundamentally change the way life settlement transactions are consummated. He pointed out that “InsurTech” is both a disruptor and an enabler in the life settlement space because it allows underwriters to arrive at a decision on the value of a policy much faster, so consumers who wish to sell their life insurance policy may soon be able to do so in a matter of weeks, not months.
This topic was further explored by S. Jay Olshansky, Ph.D., professor in the School of Public Health at the University of Illinois at Chicago, and chief scientist at Lapetus Solutions. Dr. Olshansky addressed some of the most recent innovations in predictive algorithms for estimating life expectancy and the quest for improved underwriting throughout the industry.
“The life settlement process simply takes too much time, primarily because of a very slow underwriting process historically used in the industry,” said Dr. Olshansky. “The good news is that the future of underwriting is here, or at least is very close. We’re now able to use wearable sensors to monitor vital statistics, access blood information without a needle and blood draw, evaluate bio markers and even do automated assessments of an individual’s profile photograph — these innovations allow us to obtain a much faster life expectancy and therefore a more efficient and more accurate baseline for underwriting.”
Another presentation was delivered by Anthony Tempesta, principal at Ernst & Young LLP, who focused on how “InsurTech” is changing the traditional model of life insurance. Tempesta described a wide range of disruptive technologies — including Artificial Intelligence and the use of Big Data analytics — that are increasing life insurance underwriting and policy valuation accuracy.
Other conference sessions included:
* “Building a Portfolio: Evaluating COI Risk”: An analysis of trends and patterns that indicate the likelihood of Cost of Insurance (COI) increases by insurance carriers, and the relationship to longevity risk from an investor’s perspective. The panelists were Mark Venn, managing director and chief executive officer of ClearLife, Ltd., and Matthew Sheridan, consultant to QuantRes.
* “The Supply Side”: A review of the current supply-side market conditions and look into the future of the secondary, tertiary and direct-to-consumer markets. The moderator was Cynthia Poveda, past chair of LISA, and panelists were Jeffrey Bollerman, managing director of Houlihan Lokey, and Jay Jackson, vice president of Abacus Life Services.
* “Federal Tax Provision Changes”: A session discussing the effects of recent changes to the U.S. federal tax law, including an update on the details pertaining to IRS reporting requirements and other specific tax issues. The panelists were James W. Maxson, partner at Edwards Maxson Mago & Macaulay LLP, and Thomas Weinberger, partner at Schulte Roth & Zabel.
* “Investment Performance”: A panel discussion regarding various issues impacting the establishment of a set of performance standards for life settlement investments. Moderated by Darwin M. Bayston, CFA, president and chief executive officer of LISA, the panelists included Bill Corry, owner of Corry Capitol Advisors, and Dan Young, senior managing director of Vida Capital Inc.
“We had a record attendance at this year’s Life Settlement Institutional Investor Conference, which has become the most significant annual event of its kind that brings together professionals from pension funds, hedge funds, family offices, foundations and endowments for updates on the latest developments regarding the life settlement asset class,” said Bayston.
About the Life Insurance Settlement Association
The Life Insurance Settlement Association (LISA) is the nation’s oldest and largest organization representing participants in the life settlement Industry, with a current membership of more than 90 companies doing business in all 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands. The mission of LISA is to promote the development, integrity and reputation of the life settlement industry, to advance the highest standards of practice and professional development for the industry, and to educate consumers and advisors about a life settlement as an alternative to lapse or surrender of a life insurance policy. For more information, visit www.lisa.org.