In the eleven years our company has been in the life insurance secondary market, we’ve seen enormous change in how insurance is bought and sold. A range of factors have altered the market dynamic for producers: Internet competition, evasive millennials, aging baby boomers, a lack of preparedness for long term care, and a pervasive lack of understanding and motivation among consumers about their need for life insurance. All of this is challenging producers in ways they’ve never experienced before. Thriving in today’s market requires adaptability, responsiveness and creativity. Advisors know they need to add innovative solutions to their toolbox as market conditions continue to evolve. Those able to identify and harness market opportunities position themselves to create new profit centers for their businesses.
When was the last time you were offered the opportunity to access a new market? One is emerging right now that serves critical financial needs across generations from seniors to baby boomers. This is the opportunity to re-balance life insurance assets consumers already own, a transaction with no cost for advisors or consumers, using innovative secondary market principles. This is an opportunity for advisors to do well by doing good for their clients, and only requires adding a simple-to-use tool to their daily business practices.
Millions of seniors may own life insurance policies that, after years of making premium payments, are lapsed or surrendered without realizing the policy is an asset with often times significant value to be harvested. According to industry sources, as many as nine out of ten life insurance policies will be abandoned before paying out a benefit. For the senior market, this opens up a market opportunity for advisors: According to a Conning Research study as much as $187 billion of policy benefits are being abandoned annually that could be exchanged for a new living benefit.
These life insurance policies are a massive pool of assets sitting in the hands of seniors, most of whom have no idea of the value of what they own.
Over a decade ago, the life insurance secondary market became a viable private pay solution for long term care services. This opened up the secondary market to a larger, middle-class population owning small-face polices under $1 million in benefits that could be exchanged for “aftermarket” living benefits.
During this period the secondary market grew up. Today, 42 states regulate the industry to establish uniform standards and protect consumers. Many states passed disclosure requirements about a policy owner’s right to access the secondary market value of their policy. With a well-regulated environment, it has become apparent that these products could help seniors pay for long term care, delaying their need to go onto Medicaid.
Solidifying the need to address the problem in the modern era of the life insurance secondary market, in July 2017 the NAIC’s Long-Term Care Innovations (B) Subgroup released the policy paper Private Market Options for Financing Long-Term Care, endorsing the life insurance secondary market as a viable option to help people pay for long term care. In the policy paper, the NAIC also points out the disparity between the cash surrender value of a life policy and its much higher secondary market value. In our short tenure of participating in the secondary market, we have returned over $457 million to consumers compared to $33 million in surrender value in the same policies.
Today, the LifeCare Xchange functions as an “aftermarket” living benefit conversion option for life policies issued in the past without conversion riders. For seniors and their families struggling with the costs of retirement or long term care, a life insurance policy can be a source of funding to help address their financial needs.
GWG Life is a leading secondary market provider in the industry, and is dedicated to helping insurance and financial advisors access this tool for their senior clients. There are still advisors that look at the life insurance secondary market as a one-off, exotic transaction that can be more hassle than it’s worth. GWG Life changed all that with the introduction of the LifeCare Xchange®. The goal was to provide more options to policy owners and to make the process more efficient and streamlined for policy owners and agents.
Agents working with GWG Life are appointed under our license and receive E&O coverage, eliminating the need for agents to hold special licenses and coverage. Effectively, GWG Life has opened up the market for agents to incorporate this strategy into their daily business practice. This allows agents the opportunity to help their clients realize new value from their life insurance assets, and can create new opportunities and a profit center. For brokerage general agents, this represents a scalable opportunity to offer a turnkey tool set across a wide network of agents.
I invite you to join us in a movement to help consumers get more out of their life insurance assets. The new evolved world of brokerage distribution is embracing this opportunity to help BGAs better support their agents and their agents’ clients. Agents now have a way to add a true profit center to their practice without adding any new costs or burdensome processes. As 2018 progresses, you will continue to hear more about how the LifeCare Xchange is being adopted by advisors across the country. We are very proud of what we have built and we are looking forward to working with you.