Life Settlement Industry Refutes Findings
ORLANDO, Fla., June 16 /PRNewswire/ — The Viatical and Life Settlement Association (VLSAA) today reacted to a recent study of the life settlement marketplace, claiming the study is flawed and lacks application to the industry as a whole. The organization�s position is based on a technical rebuttal written by Darwin M. Bayston, CFA, a consultant to VLSAA.
“Although we welcome objective analyses and constructive observations as it relates to our rapidly growing industry, unfortunately the Deloitte — UConn study is neither objective nor constructive,” said VLSAA board member and public relations chair Scott Kirby, who is co-president of Advanced Settlements, Inc. The technical rebuttal authored by Bayston notes that the study uses and applies inappropriate data and assumptions that result in misleading or skewed results.
According to VLSAA leaders, the researchers generally demonstrated substantial naivete and lacked sophisticated knowledge of the life settlement industry. Furthermore, the findings were based on a narrow sampling of data gathered from viatical settlements conducted in the state of New York. Because New York regulates and collects data only on viatical settlements and not life settlements, the study was limited in scope to data from viatical transactions.
Doug Head, Executive Director of VLSAA, explained that a viatical transaction is substantially different from a life settlement transaction and comprises a very small segment of today�s rapidly growing senior life settlement market. A viatical settlement involves the sale of a life insurance policy by an individual with a life threatening illness characterized by a life expectancy of less than two years. On the other hand, a life settlement is the sale of a life insurance policy by a senior over the age of 65 with a life expectancy of less than 15 years.
Kirby explained that most life settlement transactions involve well-healed seniors with multiple life insurance policies that were originally purchased for income protection, or for heirs to pay estate taxes. Because lifestyle situations change over time, many wealthy seniors find they no longer need or want excess coverage, so they choose a more intelligent option than just accepting a low cash surrender value or lapsing the policy.
According to Bryan Freeman, President of VLSAA and President of Habersham Funding, LLC, some VLSAA members have reported that at least one-third of their life settlement transactions involve seniors who choose to use the proceeds from the life settlement to purchase replacement coverage in order to lower premiums payments. “The Deloitte-UConn study did not even touch upon this fact, which further demonstrates the researchers� limited grasp as it relates to motivating factors among senior consumers who choose the life settlement option,” Freeman said.
Bayston observed that the Deloitte study inappropriately used a whole life policy as the foundation to compare the differences in a policy�s intrinsic economic value and its life settlement value. Industry leaders explained that whole life policies comprise just seven percent of the life insurance settlement marketplace, whereas universal life policies comprise approximately 80 percent.
According to Bayston, “The study missed the opportunity to be a benchmark by which the millions of senior consumers who hold life insurance policies can objectively evaluate the merits of either retaining their policies until maturity, or selling them in the secondary life insurance market.” A copy of Bayston�s rebuttal may be downloaded from the VLSAA web site at http://www.viatical.org/ under the button “In the News”.
About VLSAA
The VLSAA is an Orlando, FL-based non-profit trade association founded in 1994 to serve as a national resource center, providing information about viatical and life settlements. The VLSAA, which currently has 78 member companies, is the industry�s largest and oldest trade and professional organization.
