How P&C agents and brokers can start selling life settlements

Now is an opportune time for P&C agents to generate business in this unique segment.

A life settlement can dramatically affect a client’s life. (Photo: Shutterstock)

In my previous article, I wrote about why P&C agents should consider life settlements. Now, I want to focus on how P&C agents and brokers can prepare for and generate activity in this niche area of our industry.

Life settlements involve life insurance policyowners selling their policies to secondary buyers; settlement purchasers are largely financial institutions and hedge funds, but additional buyers have emerged in this industry. This market is hot, and there are billions of dollars on the sidelines waiting for qualified policies because of all the additional entrants into the buying space. The combination of these factors makes now an opportune time for a P&C agency to expand into this segment.  

Most states regulate this business through their insurance departments, so licensing is relatively simple if one currently has a life insurance license. Usually, licensing requires a short form and a relatively small licensing fee, and neither are necessary until a case surfaces. So as long as the settlement broker is licensed, then the process can proceed until the auctioning process begins. And, a quality settlement broker will not start the auctioning process until they are relatively certain that the policy in question creates value for at least some of the providers.  

Generating life settlement activity

What are some ways that a P&C agency can build business in this area/? First of all, get your team trained on what life settlements are and what a prospect looks like. Since the P&C agent will have very little involvement in evaluating the policy, collecting medical records, purchasing the life expectancy report(s) or auctioning the policy, it is not important for the agent to have a deep understanding of life insurance or even the settlement market. What is critical, however, is that the agent understands how to identify a prospect, and most quality settlement brokers will have some form of a simple checklist to initially determine if the policy in question is worth considering for a life settlement.

The following are three simple steps to generate activity:

  1. Run an in-force life insurance report from your Client Relationship Management (CRM) system on all of your life clients. If your life clients are not on your CRM or not all have been inputted, ask your carriers to produce your books of business using your agent code(s). Look for term policies that are approaching their premium guarantee expiration periods as well as term and permanent plans with policyowners age 65 and older. A quality settlement broker will help you gather the necessary data on each policy to determine if that policy is a candidate for a life settlement. If you think you might have a prospect, ask us for our Life Settlement Qualifying Worksheet.
  2. Use your CRM system to identify all personal lines policyholders age 65 and older.  Create a campaign to educate them on the opportunity a life settlement creates to help them in their retirement. The Life Insurance Settlement Association (LISA) claims that well over $100 billion face amount of life insurance lapses annually with no value. A reasonable percentage of those policies would have priced in the settlement market, turning an expense into an asset. Ask your BGA to help you put together campaign language. 
  3. Ask your commercial clients if the company carries life insurance on key employees and/or has funded their buy-sell agreement. If so, ask if those policies have been reviewed recently. If not, ask if they would allow you to utilize the relationship you have with your life settlement broker to determine if those policies have market value. 

In any of the three scenarios above, an agent can create an asset from an insurance policy that the policyowner previously perceived no intrinsic value. We believe that a relationship with a quality life settlement broker, sound advice and expertise will set agents apart from competitors in this area, and endear agents even more to their clients.

A life settlement can dramatically affect a policyowner’s life; creating cash from an asset considered to be a cash flow liability is a unique service that will generate loyalty amongst all involved. If the P&C agent identifies the settlement opportunity and facilitates the transaction, they will be considered a trusted advisor to that client and their family. Not to mention, the settlement transaction can be financially rewarding for the P&C agency.

Michael R. Smith is the author of “Tread Lightly, A Guide To Life Insurance To The Affluent Client” and is a principal with TFP Brokerage, an Atlanta-based life insurance BGA and life settlement broker. He can be reached at mike@tfpbrokerage.com or by phone at 678.338.4384. Opinions expressed here are the author’s own. 

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