Making Life Settlements More Transparent

It's possible to unlock billions in retirement funding for seniors by using AI to streamline an outdated, gated process. 

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The retirement crisis has begun to spiral in recent years. With the pandemic, spikes in inflation, potential Social Security cuts and higher interest rates, more and more people are anxious about having enough to retire. When you consider the rising cost of healthcare and the fact that people are living longer, working well into retirement age is a potential reality for many.

As a result, many aging Americans are looking for ways to expand their savings and understand their assets. But what many don't realize is that the answer might be in their life insurance policy.

Every year, around $200 billion of life insurance will lapse or be surrendered, even though it could have been sold on the secondary market via a life settlement. It's hard to imagine that so many would leave billions on the table, but there's a good reason. Most people simply don't know life settlements are even an option. Even if they do, a lack of transparency and information makes the process so long and complex that it leads to underutilization.

Lack of Transparency Slows the Life Settlement Valuation Process 

In the traditional life settlements process, it can take months for an adviser to understand the value of a client’s life insurance policy on the secondary market, making it difficult to provide quality financial guidance.

A primary cause for this delay is a lack of access to a critical piece of information, Cost of Insurance (COI). Several variables are used to calculate the COI for a life insurance policy, such as when the insured purchased the policy, how old they were when they bought it, their health at the time, the comprehensiveness of the policy and the policy type. All of these factors affect how much it will cost to keep the policy in force over time and are essential for understanding its resale value.

But why is it so difficult to get this information? Historically, COI data is fiercely protected by life insurance companies. As a result, advisers and their clients must meander through a long and complex underwriting and selling process before they can fully understand the pros and cons of selling, keeping or surrendering a policy. 

However, AI-powered technology has the potential to open the flood gates to this data and speed up the life settlement valuation process exponentially.

See also: Time to Embrace AI in Climate Change Fight

How AI Helps Advisers See the Full Picture 

The human brain can process only four to seven variables on average at one time, but AI-powered technology can process millions of data points simultaneously. As a result, AI processing has the ability to instantly look across millions of data points to predict a COI curve and provide a data-driven life settlement valuation. 

For instance, via My Policy Predictor, Harbor Life has created an algorithm that analyzes more than 16,000 possible COI curves and matches the policyholder with the curve that best represents them. This machine learning-based calculator expedites life settlement valuations that once took advisers months to receive, making the process more accessible to all key stakeholders. Now, advisers can input a few basic questions about the insured to instantly pull a quote, with 89% accuracy, for a client's policy, and guide them on whether they should keep, sell or surrender their life insurance. 

This type of technological advancement in the life settlement space means more opportunities for advisers to not only help their clients unlock years of built-up wealth but also examine the potential for reinvestment. Historically, life settlements have been a reactive option if a client is unable to afford their insurance policy. However, technology that makes the life settlement decision process more straightforward makes it easier than ever for advisers to understand the role life insurance can play in growing a client’s wealth.

The Future of Life Settlements

With seniors expected to account for 20% of the population by 2050, giving Americans access to sufficient retirement funding has never been more crucial. In a space that has been criticized for its lack of transparency, it's possible to unlock billions in retirement funding for seniors by streamlining an outdated, gated process. 

Everyone deserves the right to know the value of their assets, and technological advancements, like the My Policy Predictor, give advisers the tools they need to solve this retirement crisis, one client at a time.

Lucas Siegel

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Lucas Siegel

Lucas Siegel is the founder and CEO of Harbor Life Settlements, a life settlement company that is dedicated to helping seniors and the terminally ill sell their life insurance policies, and Harbor Life Brokerage, a life settlement broker.


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