Premium Financing Thoughts

[Mr. Bill]

The DOIs arent doing anything on STOLI's right now. Everyone is watching the larry king case to see what happens. It will be the benchmark on policy. Again, I haven't heard of Capital 10, but sounds like they are ripping the agents off.

If you do a program like this, you should receive 100% of the commission, not just 20k and the clients get around 3% of face. So if you write your grandpa a 1M policy, then he will receive a check for 30K.

With insurable interest, people in the LS industry believe that it must only exist the moment you buy the policy. You can then turn around and sell it that afternoon.

No matter the outcome for this wet business, premium financing and traditional life settlements will not be going anywhere.

So, do tell - what exactly are the moving parts? Is this back to Provada or something?

Let's say it is $1mm - client (or beneficiaries who waive their rights) get a check for 3%, then what should the agent expect? Dollar/percentage wise. How would we find out what the true commission payable is? Is it just something you shop for? Who does the shopping? I'm so confused!!!

 

[lifesettlementadvisor]

So, do tell - what exactly are the moving parts? Is this back to Provada or something?

Let's say it is $1mm - client (or beneficiaries who waive their rights) get a check for 3%, then what should the agent expect? Dollar/percentage wise. How would we find out what the true commission payable is? Is it just something you shop for? Who does the shopping? I'm so confused!!!

Every broker works alittle differently on Wet policies (what you described above). A good broker will not take a % of your comms. So as the agent you will receive the same commission for writing this policy as any other 1mm policy. There will be SOME out of pocket expense though. On wet policies (but not standard LS cases) the broker requires the agent to obtain APS report and two LEs. APS reports can run from $25-100 and LEs are about $250 a piece. Most agents pay for this themselves. Some take it out of the clients 3%. Brokers do this to insure that agents only submit quality cases.

The

 

[lifesettlementadvisor]

So, do tell - what exactly are the moving parts? Is this back to Provada or something?

Let's say it is $1mm - client (or beneficiaries who waive their rights) get a check for 3%, then what should the agent expect? Dollar/percentage wise. How would we find out what the true commission payable is? Is it just something you shop for? Who does the shopping? I'm so confused!!!

Every broker works alittle differently on Wet policies (what you described above). A good broker will not take a % of your comms. So as the agent you will receive the same commission for writing this policy as any other 1mm policy. There will be SOME out of pocket expense though. On wet policies (but not standard LS cases) the broker requires the agent to obtain APS report and two LEs. APS reports can run from $25-100 and LEs are about $250 a piece. Most agents pay for this themselves. Some take it out of the clients 3%. Brokers do this to insure that agents only submit quality cases.

Most agents will write multiple policies on the same person. So with your example. After you finish the LS on your 1mm client (and he recieves 30k, and you receive your 40-50K) Then you can write another 1mm on the same guy (as long as his net worth will allow it)

 

[djs]

I couldn't disagree more. Everyone gets something out of a deal like this.

1. Client gets cash.
2. Agent gets commish.
3. Insurance company gets premiums.
4. Investors get a nice ROR.

Oops, bad math.... It simply isn't possible for both the investor AND the insurance company to win in this deal. One of those 2 has to lose out. The investors are betting that the person will die sooner than the insurance company projected. If they die later, the insurance company wins.

When it's a small niche market, it probably doesn't impact the insurance companies much, and they don't worry about it. If the market becomes larger, then lapse ratios will decrease, making rates go up overall.

So, you can add to your something for everyone. The person who doesn't participate will pay more for thier life insurance, and the agent will make even bigger commissions!

As you might notice, I'm not a big fan of this system. I won't sell them, but I don't really have any objections to others selling them, as long as the insurance company is on board. I know many insurance companies figure their mortality tables are pretty dialed in, leaving little room for investors to do very well.

The reason I don't care for them is it puts the person as the pawn in the game between the investor and the insurance company, and can cause problems with rightful heirs. As long as all of that is adequately disclosed, then the small amount paid to the pawn (err, I mean insured) is perhaps a good thing for them. The problem here is they need networth to justify the insurance, which means they probably need the insurance coverage more than the immediate $$$$.

Dan

 

[Mr. Bill]

So now the question begs itself - how would we find a broker?

 

[lifesettlementadvisor]

You can find a broker on

LISA | Welcome to the LIFE INSURANCE SETTLEMENT ASSOCIATION

All brokers don't handle wet policies.

Also you can ask me and I can point you in the right direction.

 

[Macdaddy]

Oops, bad math.... It simply isn't possible for both the investor AND the insurance company to win in this deal. One of those 2 has to lose out. The investors are betting that the person will die sooner than the insurance company projected. If they die later, the insurance company wins.

When it's a small niche market, it probably doesn't impact the insurance companies much, and they don't worry about it. If the market becomes larger, then lapse ratios will decrease, making rates go up overall.

So, you can add to your something for everyone. The person who doesn't participate will pay more for thier life insurance, and the agent will make even bigger commissions!

As you might notice, I'm not a big fan of this system. I won't sell them, but I don't really have any objections to others selling them, as long as the insurance company is on board. I know many insurance companies figure their mortality tables are pretty dialed in, leaving little room for investors to do very well.

The reason I don't care for them is it puts the person as the pawn in the game between the investor and the insurance company, and can cause problems with rightful heirs. As long as all of that is adequately disclosed, then the small amount paid to the pawn (err, I mean insured) is perhaps a good thing for them. The problem here is they need networth to justify the insurance, which means they probably need the insurance coverage more than the immediate $$$$.

Dan

Dan,

I did not say the insurance company wins in the end. I said everyone gets something. In this case it is premiums, and that is what insurance companies are after.

A broker told me that these deals are like crack cocaine to the insurance companies that get involved with these deals.

They want to quit, but they can't. They love the large premiums.

Nobody is in the middle of anything. You write the app, and the intermediary orders the APS from the doctors and if that goes well, the life expectancy report gets ordered. Once those are done the offer is made from the investor group.

If these deals are bad, is it also bad for someone who has had a policy for 20 years to sell it for cash? Of course not.

 

[J.R.]

How is a lived expectancy ordered researched?

I'm sure that are some actuaries up in an office drinking coffee and running their computer programs, but I'd curious to the specifics of these reports and whether or not the actual results are explicated to the prospect.

 

[Macdaddy]

How is a lived expectancy ordered researched?

I'm sure that are some actuaries up in an office drinking coffee and running their computer programs, but I'd curious to the specifics of these reports and whether or not the actual results are explicated to the prospect.

These reports are ordered from third parties and the information from the prospects health history, APS from all doctors, and current age are all used in it's rendering.

The life expectancy report will generate the number of months they expect the prospect to live.

 

[lifesettlementadvisor]

Most LS companies use the same 4 LE companies.
They are
21st
AVS
Fasano
EMSI

These companies are farely acurate with their predictions. It is up to you (the agent) whether or no you want to share with the client what their LE comes back at.