Life Settlement Market Declines 36 Percent Due to Economic Turmoil

The questionable life settlement market saw a 36 percent decline in 2009 due to economic turmoil, according to a recent report from Conning & Co. Despite this being a popular option in the life insurance industry, a decrease in capital among hedge funds and private equity firms resulted in less money to buy policies.

Policies Had Face Value of $8 Billion

According to 2009 stats, life insurance policies sold by insured individuals had a face value of about $8 billion, which is a 36 percent decrease from the year prior, said the Hartford, Connecticut-based company. There have been a number of reasons for the decrease in this market, which currently allows investors to purchase existing life insurance policies then name themselves as the beneficiary.

In addition to less money to spend, one major reason for the decrease was a change in underwriting for the policies. Conning said the industry began a new method for calculating the life expectancy of policyholders in a way that actually extended their age of death. Investors realized they could have to wait longer for a beneficiary to die and collect their benefits and were deterred by the process.

Life Settlements Deemed Questionable

While some investors may be disappointed that the underwriting system has changed and now affects the market differently, Consumer Affairs and other consumer groups may be happy to hear that business is down.

Recently, Consumer Affairs issued a warning about the risky business of selling life insurance policies. There are a lot of scammers out there looking to benefit off of a policyholder’s death. According to the group, even legitimate deals come with risks because these strangers have access to your medical records and can contact you to check on your health–all for their benefit.

This is why, for some, the decrease in business is probably a good thing. Of course, what the decrease means to you is relative. Just remember, if you are thinking about selling your own life insurance policy, know the risks so that you don’t find yourself in a situation that you regret.