A New York and New Jersey Lawyer Who Represents Policyholders and Beneficiaries in Life Insurance Denial Cases

Life settlement companies buy existing life insurance policies from insureds for less than the face value and then receive the full value when the insured dies. This business was supposed to be the “next big thing” after the subprime mortgage market rocketed on the scene, until, that is, the market imploded.

Life settlement companies are now under investigation by the Massachusetts Attorney General, reports the Boston Herald.

And they should be. The industry is new and the goings-on inside it are relatively unknown to authorities. There is no regulation of it, to my knowledge, opening the door to fraud on consumers. Plus the same type of financial mechanism is involved with them as in subprime mortgages–they get bundled up and sold to investors.

A disaster in the making?

Supporters of the business say that many policies lapse without any payment, and so it is a guaranteed way to get money into the pockets of insureds who need it. They also downplay any risks to the financial system.

The countervailing argument is that the life settlement business can lead to fraud and taking advantage of consumers, especially vulnerable eldery persons, leave needy beneficiaries without protection, and could wreack havoc on the financial system.

To my mind, as a life insurance attorney representing policyholders, this is the more powerful argument. After all, it is difficult to see how this type of business can benefit society, except perhaps in certain dire situations where the insured and family members go into it with eyes wide open. Besides, the business of betting on death is an unsavory one.

We will wait and see how this market develops.

One Response to “Life Settlement Business Under Investigation in MA”

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