The Role of the Broker in today’s life settlement market

The secondary market for life insurance policies (commonly referred to as life settlements) is an exciting option for policies that have become unneeded, unwanted or no longer affordable. To capitalize on this opportunity, however, most people would need professional help.

The underlying asset (a life insurance policy) is inherently complex, as is the process of putting a policy “up for sale” and maximizing the value. Successfully completing a life settlement is not simply a do-it-yourself project.

Generally, the first step in the process is a conversation between a policy owner and a life insurance agent or other professional financial advisor to determine whether a life settlement is even a possibility. Equally important is an objective evaluation of suitability. After all, life insurance is a valuable asset, and a policy that is an excellent candidate for a life settlement may well be essential to an individual’s overall financial plan.

The more valuable the policy is likely to be as a settlement, the more important it becomes to make certain that the policy is truly not needed or that the beneficiary or other close relatives are unwilling or unable to take over the premiums.

Once it’s determined that a life settlement could be suitable, most advisors will seek help from a wholesale life settlement broker. Most recognize that the process of maximizing the value in what can be a very lengthy and complex transaction requires specialized expertise and experience.

A wholesale life settlement broker is in the market every day and has developed the expertise, infrastructure and relationships to successfully complete the transaction in addition to complying with all applicable laws and regulations. It is vital that advisors partner with reputable firms that focus on serving the client and managing the process in an efficient, transparent and fully compliant fashion.

A professional life settlement broker will also make certain that all confidential records are handled appropriately and that only qualified buyers have access to sensitive information about the policy and insured. When evaluating the choice of a life settlement broker, the list below includes some of the important considerations:

A culture of compliance. A broker who operates within a culture of compliance follows procedures that meet the highest standards, especially important now that 90% of the American population lives in states with life settlement regulation.

Written agreements. Written agreements between producers and providers should be retained and made available upon request to potential clients. There should also be a written agreement between the life settlement broker and the seller, detailing terms and conditions under which the broker will represent the client, including services provided and the method for calculating the amount of compensation and fees that will be payable upon successful completion of the transaction.

Comprehensive documentation. The life settlement broker should have forms and materials approved by the department of insurance in the policy owner’s state. (Although not all states require forms to be approved, most professional brokers will use generic forms that meet the highest standards for those states that do.)

Extensive disclosure. The broker’s documentation should deal objectively with the pros and cons of life settlements. The proceeds may be taxable, eligibility for certain benefits may be impacted and the fact that future insurability may be curtailed should be mentioned. The broker should keep the client or agent apprised of progress and deliver all offers as they are received.

Written policies for privacy protections. Much of the info collected in the life settlement process is highly confidential, and the life settlement broker must maintain complete files and records on every transaction for several years. Every broker should have a written policy for the protection of confidential information. Maintaining a secure environment for physical files and policies, procedures for access and a secure systems environment are among the key requirements.

A successful track record. Every investor, and the providers who represent them, have only so much money available to purchase policies at any given time. Accordingly, they prefer to work with brokers they know and trust and who have a record of successfully closing cases once the offer is delivered. Professional life settlement brokers will be happy to provide information about their experience in the marketplace, sample cases and the volume of successful files they have completed. Membership in professional associations (such as the Life Insurance Settlement Association — LISA) is also an important consideration.

The secondary market is essentially a directed auction process, and in any auction, the more bidders involved, the higher the ultimate price to the seller is likely to be. To do the best possible job and meet your fiduciary responsibility to your client, then, is it not prudent (or even mandatory) for an advisor to present the potential life settlement to the largest possible market by employing several life settlement brokers?

While it would seem logical on the surface, employing multiple brokers on the same policy often works against the policy owner and results in a lower value received, rather than a higher one. When a provider receives a file from more than one broker, it immediately raises questions as to who (if anyone) actually controls the case. Some providers follow a first-in policy; others will make the same offer (if any) to all comers. Either way, the ability to negotiate a higher final price for the policy is reduced for everyone.

Even worse, most providers have multiple funding sources, and when the funders see a file coming in from different sources, they sometimes decline to offer on the basis that the case is unlikely to close. Once an offer is made, a funder must earmark that money, which in effect ties it up and reduces the ability to make offers on cases that may be more promising.

Getting to an acceptable offer is obviously important, but a great offer that drags on for months and never funds is of no value to anyone. While a regulated environment provides many protections to consumers, it can also make the process of moving from an accepted offer to receiving the proceeds lengthy, complex and very information intensive. A professional life settlement broker will know what information is likely to be required and will begin the process of collecting it, uncovering (and correcting) deficiencies and identifying potential problems even before the final offer is accepted and contracts are issued.

One key skill for a professional broker is the ability to solve problems that can otherwise turn into show-stoppers. Some insurance carriers deliberately create obstacles and, even when they fully cooperate, there can be discrepancies in the record. Investors are concerned about obtaining clear title to the asset they are purchasing, and thus want a clear record from the policy’s inception in terms of insurable interest, chain of custody, the source of premiums paid and the information provided on the application for insurance. A professional broker, by virtue of industry contacts, knowledge and experience, can be invaluable in resolving issues that might otherwise derail the transaction.

As the party charged with representing the seller’s best interest, the life settlement broker plays a key role and often means the difference between a relatively quick and painless transaction as opposed to one that drags on for months. For advisors and their clients, finding the right partners to assist in a life settlement is one of the important keys to success.

Russel Dorsett, CLU, is director of Veris Settlement Partners and has served as a senior executive in a number of major companies, including Philadelphia Life, Great Southern, Bankers Life of New York, AIG, AIA Superannuation Company and AIA/Australia Ltd. Dorsett has also served as president of the Life Insurance Settlement Association.

The secondary market for life insurance policies (commonly referred to as life settlements) is an exciting option for policies that have become unneeded, unwanted or no longer affordable. To capitalize on this opportunity, however, most people would need professional help.

The underlying asset (a life insurance policy) is inherently complex, as is the process of putting a policy “up for sale” and maximizing the value. Successfully completing a life settlement is not simply a do-it-yourself project.

Generally, the first step in the process is a conversation between a policy owner and a life insurance agent or other professional financial advisor to determine whether a life settlement is even a possibility. Equally important is an objective evaluation of suitability. After all, life insurance is a valuable asset, and a policy that is an excellent candidate for a life settlement may well be essential to an individual’s overall financial plan.

The more valuable the policy is likely to be as a settlement, the more important it becomes to make certain that the policy is truly not needed or that the beneficiary or other close relatives are unwilling or unable to take over the premiums.

Once it’s determined that a life settlement could be suitable, most advisors will seek help from a wholesale life settlement broker. Most recognize that the process of maximizing the value in what can be a very lengthy and complex transaction requires specialized expertise and experience.

A wholesale life settlement broker is in the market every day and has developed the expertise, infrastructure and relationships to successfully complete the transaction in addition to complying with all applicable laws and regulations. It is vital that advisors partner with reputable firms that focus on serving the client and managing the process in an efficient, transparent and fully compliant fashion.

A professional life settlement broker will also make certain that all confidential records are handled appropriately and that only qualified buyers have access to sensitive information about the policy and insured. When evaluating the choice of a life settlement broker, the list below includes some of the important considerations:


A culture of compliance. A broker who operates within a culture of compliance follows procedures that meet the highest standards, especially important now that 90% of the American population lives in states with life settlement regulation.

Written agreements. Written agreements between producers and providers should be retained and made available upon request to potential clients. There should also be a written agreement between the life settlement broker and the seller, detailing terms and conditions under which the broker will represent the client, including services provided and the method for calculating the amount of compensation and fees that will be payable upon successful completion of the transaction.

Comprehensive documentation. The life settlement broker should have forms and materials approved by the department of insurance in the policy owner’s state. (Although not all states require forms to be approved, most professional brokers will use generic forms that meet the highest standards for those states that do.)

Extensive disclosure. The broker’s documentation should deal objectively with the pros and cons of life settlements. The proceeds may be taxable, eligibility for certain benefits may be impacted and the fact that future insurability may be curtailed should be mentioned. The broker should keep the client or agent apprised of progress and deliver all offers as they are received.

Written policies for privacy protections. Much of the info collected in the life settlement process is highly confidential, and the life settlement broker must maintain complete files and records on every transaction for several years. Every broker should have a written policy for the protection of confidential information. Maintaining a secure environment for physical files and policies, procedures for access and a secure systems environment are among the key requirements.

A successful track record. Every investor, and the providers who represent them, have only so much money available to purchase policies at any given time. Accordingly, they prefer to work with brokers they know and trust and who have a record of successfully closing cases once the offer is delivered. Professional life settlement brokers will be happy to provide information about their experience in the marketplace, sample cases and the volume of successful files they have completed. Membership in professional associations (such as the Life Insurance Settlement Association — LISA) is also an important consideration.

The secondary market is essentially a directed auction process, and in any auction, the more bidders involved, the higher the ultimate price to the seller is likely to be. To do the best possible job and meet your fiduciary responsibility to your client, then, is it not prudent (or even mandatory) for an advisor to present the potential life settlement to the largest possible market by employing several life settlement brokers?


While it would seem logical on the surface, employing multiple brokers on the same policy often works against the policy owner and results in a lower value received, rather than a higher one. When a provider receives a file from more than one broker, it immediately raises questions as to who (if anyone) actually controls the case. Some providers follow a first-in policy; others will make the same offer (if any) to all comers. Either way, the ability to negotiate a higher final price for the policy is reduced for everyone.

Even worse, most providers have multiple funding sources, and when the funders see a file coming in from different sources, they sometimes decline to offer on the basis that the case is unlikely to close. Once an offer is made, a funder must earmark that money, which in effect ties it up and reduces the ability to make offers on cases that may be more promising.

Getting to an acceptable offer is obviously important, but a great offer that drags on for months and never funds is of no value to anyone. While a regulated environment provides many protections to consumers, it can also make the process of moving from an accepted offer to receiving the proceeds lengthy, complex and very information intensive. A professional life settlement broker will know what information is likely to be required and will begin the process of collecting it, uncovering (and correcting) deficiencies and identifying potential problems even before the final offer is accepted and contracts are issued.

One key skill for a professional broker is the ability to solve problems that can otherwise turn into show-stoppers. Some insurance carriers deliberately create obstacles and, even when they fully cooperate, there can be discrepancies in the record. Investors are concerned about obtaining clear title to the asset they are purchasing, and thus want a clear record from the policy’s inception in terms of insurable interest, chain of custody, the source of premiums paid and the information provided on the application for insurance. A professional broker, by virtue of industry contacts, knowledge and experience, can be invaluable in resolving issues that might otherwise derail the transaction.

As the party charged with representing the seller’s best interest, the life settlement broker plays a key role and often means the difference between a relatively quick and painless transaction as opposed to one that drags on for months. For advisors and their clients, finding the right partners to assist in a life settlement is one of the important keys to success.

Russel Dorsett, CLU, is director of Veris Settlement Partners and has served as a senior executive in a number of major companies, including Philadelphia Life, Great Southern, Bankers Life of New York, AIG, AIA Superannuation Company and AIA/Australia Ltd. Dorsett has also served as president of the Life Insurance Settlement Association.

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