The life settlement marketplace has a problem. There aren’t enough policies to buy. Of course, this isn’t precisely the truth, there are plenty of polices out there and plenty of consumers who would benefit from presenting them to the life settlement marketplace. However, so far, investors have been unwilling to finance the marketing expenses necessary to bringing more policies to the marketplace.
Some brokers and provider have made and effort, and a few have made some inroads, to educate agents, advisors and consumers concerning the life settlement option. Some market players have broadened their marketing presence to establish small beachheads in the finance services world generally but, it’s not enough. However, the fact remains that most consumers and most advisors do not understand the secondary market for life insurance and for this reason, the supply side of the business remains constrained.
It’s not easy to educate consumers…about anything really, but especially about life insurance. There’s so much about life insurance the public just doesn’t get. Add the special twist that is life settlement and the task becomes even more daunting. Still, it must be done. Consumers continue to forgo billions in value in favor of lapse or surrender without ever even hearing the words “life settlement”. Investors meanwhile stand pat in their insistence that providers and brokers should do more to “find” more policies. In other words, the guys with the money and the ability to throw their weight behind a concerted effort to inform consumers about their legal property rights in their own life insurance want the little guys to fund that effort.
This runs contrary to what the life insurance industry itself does to sell their wares in the consumer marketplace.
Distribution and marketing costs are a big part of the budgets of the biggest insurers worldwide. They learned long ago that to write new business, the front-end expenses were necessary-considerable but necessary. There’s an old saying, so old it’s a cliché in the insurance world, “Life insurance is sold, not bought”. The message is that you have to spend money to put new policies on the books. Like it or not, a product as hard to understand as life insurance must be promoted aggressively and the life settlement option is a benefit that is equally challenging to sell.
The life settlement world’s biggest players, the institutional investors, have yet to accept the implications of this adage. If you want to see more quality policies to buy you have to support the marketing efforts the mostly “Mom-and-Pop” life settlement companies have undertaken. You can’t squeeze fees so much that there’s little left over for marketing and you can’t expect the smallest players in an industry to bear the cost of the most expensive activity in the marketplace. In other words, investors need to invest in the infrastructure of the marketplace generally and underwrite the broader marketing campaign. Just demanding that the service providers do more when they simply don’t have the resources to do so is pure folly. Until someone breaks through this impasse, we’ll remain a boutique business with lots of potential no one can tap fully.