Conning Research: Life settlements growing fast, increasing profits pressures |
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Written by U.S. Insurance News
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Monday, 30 June 2003 |
Life insurers' profit margins, already severely strained thanks to lower investment returns, are now being squeezed further by the growing life settlement industry, according to a new study. The Conning Research study, "Life Settlements: Additional Pressure on Life Profits," finds the face amount of insurance in life settlements — transfers of existing life policies when the insured has an impaired life expectancy — are substantially higher than current estimates, and the study estimates a very substantial growth rate as well.
NEW YORK — Life insurers' profit margins, already severely strained thanks to lower investment returns, are now being squeezed further by the growing life settlement industry, according to a study from Conning Research & Consulting, Inc.
The Conning Research study, "Life Settlements: Additional Pressure on Life Profits," finds the face amount of insurance in life settlements — transfers of existing life policies when the insured has an impaired life expectancy — are substantially higher than current estimates, and the study estimates a very substantial growth rate as well.
"This part of the life insurance industry has been flying under the radar screen for some time now," said Michael Weinstein, director of research at Conning. "It is certainly beneficial to policy holders to have the option presented by life settlements, but if the industry continues to produce double-digit growth rates, the storm clouds are gathering for insurers. Insurers need to pay more attention to this industry and react carefully in their initial pricing of policies."
Conning's study analyzes the life settlement industry from its inception during the HIV/AIDs crisis in the 1990s to the present day. While life settlements have been publicly attacked because of increased fraud potential, Conning's study finds that insurers, regulators and legitimate life settlements providers are all working hard to minimize fraud.
"Both fraud and privacy issues are real concerns when it comes to life settlements," Weinstein said. "At the end of the day, however, this industry is providing a valuable service to the policyholder, so all parties will work to resolve the surrounding issues and make it work. A bigger inhibitor to growth will be funding issues in the future. If demand for the product continues, funding issues will be worked out in time."
"Life Settlement: Additional Pressure on Life Profits" is available from Conning Research & Consulting, Inc. by calling toll free (888) 707-1177 or (860) 520-1521. A complete listing of all Conning research products can also be found by visiting the company's Web site at www.conningresearch.com.
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