By Clay Gibson
Conning publishes a comprehensive annual research report on the state of the life settlement market, featuring a thorough examinations of trends, statistics and market drivers within the industry.
Conning’s projection that the face value of the U.S. life settlement volume will increase between 1 and 2 percent between 2018 and 2027 is considerably more conservative than our predictions for growth at Magna Life Settlements.
Along with my colleagues at Magna, I have studied the market forces that affect life settlement growth and have developed a well-founded confidence in the continued growth of consumers selling their life insurance policies. The past two years have certainly supported this projection, with a 23 percent increase in life settlement volume in 2016 and continued growth of 19 percent in 2017.
In Magna's 2018 Life Settlement Industry Report, we projected a 34 percent increase in the settlement volume, which is a significant increase from the 1-2 percent Conning predicts. If these double-digit increases continue, the market will certainly outpace Conning’s more modest forecast. Following are some of the key factors that support the prospect of continued growth in life settlements:
- An aging population. The nation’s demographic shift is well-documented, and as Americans get increasingly older, the demand for new income sources will only rise accordingly. The Conning report cites U.S. Census Bureau data stating that the number of people older than 65 in the U.S. will jump 38 percent from 2015 to 2025. This increase is accompanied by a projected double-digit compound annual growth rate for all age brackets 70 and older. Additionally, one out of every two people over the age of 65 has at least one life insurance policy. By 2030, one in every five Americans will be retirement age and looking for retirement income.
- More efficient life settlement processes. The growth of the life settlement industry has led directly to a streamlining of the settlement process, often allowing consumers to pursue a settlement quote and proceed with the sale in a more direct manner. This can provide an even higher payout to the policy holder by eliminating intermediary fees. The growth of technology and the industry's drive to create efficient systems within the life settlement process makes life settlements more accessible than ever for retirees looking to turn an insurance liability into a financial asset. As this trend continues in the next decade, it will spur significant growth in the number of policies that are sold.
- Increased awareness of life settlements. Life settlement providers have broadened their outreach efforts so that every senior with an unneeded or unwanted life insurance policy can be educated about the life settlement option. Additionally, new legislation and tax reforms have made life settlements more financially favorable to older Americans. Senior consumers are in the driver’s seat, with numerous opportunities to learn whether a life settlement would suit their needs.
Not even the most meticulous researchers can predict the future with certainty, but market forces and retirement trends seem to indicate a higher growth rate for life settlements than predicted in the latest Conning report. Regardless of the differences in projected industry growth, experts agree that the future is bright for life settlements.
Clay Gibson is senior vice president of Magna Life Settlements. Clay may be contacted at [email protected].
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