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Genworth Financial, Inc. Message Board

  • darrell_kramer darrell_kramer Sep 6, 2009 11:11 AM Flag

    Wall Street Pursues Profit in Bundles of Life Insurance

    What do you guy's think about this?

    http://www.nytimes.com/2009/09/06/business/06insurance.html?_r=1&hp

    It's a long article so I didn't past but it's in the NYT.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • this is a negative to life insurance companies who would have natural drop offs of life insurance for policy holders whose later life needs decrease in need for life insurance. these settlement shops look for generally 70+ policy holders who will sell their whole life policies so they can take over and the life insurer who had favorable later life drop offs of policies, now has a hedge fund that will cash out the policy in 8 years because they can afford to make the monthly payments. In the past some of these policies were cashed earlier at a lesser cost to the insurers. This is changing and will make it more expense for the insurers as policies will be maintain until full 100% payout.

      • 1 Reply to gailslimphenternin
      • Good analysis, Gail. This is why insurance companies do not like the life settlement business. When insurance companies underwrite and price new life insurance policies, they factor in a certain "lapse" rate, i.e., they have very good statistics as to how many policy holders will eventually stop paying the premiums on their life policies or voluntarily surrender the policy and the life insurance company never has to pay out the death benefit. When people sell their policy to a life settlement company, the life settlement company does not allow the policy to lapse and the life insurance company will eventually have to pay out the death benefit on that policy. This throws the insurance company statistics off kilter and makes their life business less profitable.

    • Haven't these guys learned their lessons?
      This would provide a marvelous incentive for Wall Street to fund "Money Death Squads". Imagine: A mulit-billion dollar securitization industry predicated on the idea that scads of old people would die sooner than expected. A hitman's dream. Just figure out a way to off the folks that back the policies without anyone finding out it was actually murder. And without the policy holder's consent. (That's the way my mortgage got re-packaged-without my consent). If the mortgage-backed cdo industry had been built on a similar proposition then every other house in the country would have been torched by now to collect the residuals.
      Any sane executive would be very wise to steer clear of a plan like the one in the article.

      Chief

    • Should be viewed as a posiive for the insurance company...funds buying will of course guarantee the premiums.

      • 1 Reply to gtcld_2000
      • No, a negative, though I really doubt a big one or it will be anytime soon to see any impact if there is one.

        These are ¨life settlements,¨ there is already some market for it and it is controversial. Basically they are cashing out life insurance policies before the person passes away, investors gamble on the difference of what they pay and the value of he policy when he does. They are paying over 20% more than an insurance company would, competing with profits there. They would also be reducing the number of late stage cancels which are a profit source for the insurance companies.

 
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