Wednesday, August 15, 2018

A Triggering Scenario

Back in July, I posted my skepticism of a claim by Life Settlement industry players that insurers were (surreptitiously?) raising the cost of insurance in viaticated policies:

"Some life settlement companies have responded to universal life cost-of-insurance increases by suing the life insurers  that issued the policies"

Of course, they're free to pursue their own interests, but I suspect that they'll have quite the uphill battle.

Why's that, Henry?

Well, as I noted in that previous post, there's no mechanism for singling out specific policies for increases. For another, policies themselves have specific, stringent definitions on how, why and when these internal costs may be raised. I took the liberty of screencapping the relevant verbiage from one such policy I recently wrote (and which I believe to be fairly typical):


 [click to embiggen]

As one can plainly see, the cost of insurance (COI) is pretty well locked down, and applies to only a few specifically-worded populations, none of which are "life settlement brokers."

The other interesting thing to note is that the other internal costs are left more freely to the carrier's discretion, so it's possible that policyholders could experience those, regardless of the company's mortality experience. But again, there's no singling out of the life settlement folks.

Based on this, I don't see how they'll prevail.

But then, I'm not a lawyer, and I didn't stay in a ...

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