Life Settlement Institute Agrees with Report Citing Insurance Carrier Study Flawed

WASHINGTON, D.C., (December 14, 2005) The Life Settlement Institute (LSI), the leading organization representing providers for the secondary market for life insurance, today commended a new report criticizing the methodology and findings of a life insurer-financed study that denied the economic benefits of life settlements.
The new report, authored by Hal J. Singer, President of Criterion Economics and Professor Eric Stallard of Duke University, reviewed the methodology and conclusions of a study by Deloitte Consulting and the University of Connecticut Actuarial Center about the secondary market for life insurance. The study, financed by three major insurance carriers, used flawed data and contained actuarial errors, which could potentially mislead consumers and their advisors about the benefits of the secondary market.
Brian Smith, President of LSI, said, “Consumers should be provided with accurate information about their life insurance policies when they are considering the purchase of new insurance or when faced with the lapse or surrender of a policy. Life insurers’ efforts to misinform the public about the secondary market for life insurance should be exposed and condemned.”

The Carrier Study was easily determined to be inaccurate, as it relied on data from New York State, which does not regulate life settlements, so it cannot be used as a basis for measuring the burgeoning secondary market for life insurance and the benefits to consumers.

The Carrier Study suggests that policyowners apply a demonstrably flawed and decidedly impractical measure of “intrinsic economic value” when facing the choice of imminent lapse or surrender of their life insurance policy. This “value” disregards the fact that, according to a leading actuarial firm, more than 8 of 10 Universal Life insurance policies end in a lapse or are surrendered. “It is wholly self-serving for life insurers to create an inapplicable measure to encourage consumers to keep paying premiums on a policy that is no longer affordable, no longer meets the policy owner’s needs, or is simply underperforming” said LSI President Smith.
The secondary market serves to make life insurance more valuable to consumers by providing a competitive market value for life insurance. In recent years, life settlements have provided life insurance policyowners with more than $1 billion over cash surrender value. In addition, the long-standing public policies that protect the contractual and property rights of owners of life insurance must be upheld and strengthened.
The Life Settlement Institute works with government regulatory agencies, legislators and the life insurance industry to promote compliance of strict regulations and comprehensive standards and practices for life settlements. The Institute and its founding members expect to increase awareness and acceptance of this new financial option.
Four institutionally funded Life Settlement companies formed LSI. Founding members include: -- Coventry First, LLC; Fort Washington, PA, Life Equity LLC; Hudson, OH, Life Settlement Corporation d/b/a Peachtree Life Settlements; Boca Raton, FL, Maple Life Financial, Inc.; Bethesda, MD.

For additional information, please visit www.lifesettlementinstitute.com or contact Brian Smith at bsmith@lifeequity.net.