DIFFERENT ANGLE by Kenneth Rijock
World-Check regularly covers developments in the life settlement industry*. Recently, new companies have been created to enter the secondary market for life insurance . The problem is, they are actually the financial source of the premiums for the policies they sell at retail. These investor-generated life insurance policies have been held by UK and US courts to be unenforceable as a matter of public policy. If you are banking such companies, be advised that America's largest life insurance companies, who are the payors on such policies, can correctly refuse to pay on the policies at maturity, for failure of an insurable interest. What will that do to your bank in the marketplace, when your role is disclosed in the media?
- Investor-generated life insurance occurs when high-value insurance policies are taken out and funded by private investment companies, who own and are the beneficiaries when the elderly insureds pass away.
- The courts have uniformly held that there is no "Insurable Interest" in such policies, which requires that the party obtaining the insurance has an interest, either as a creditor or a surety of the insured, or through blood ties or marriage to him,as will justify the reasonable expectation or advantage or benefit from the continuation of his life. if there is no insurable interest, the law considers the insurance contract a mere wager.
- Life insurance contracts where there is no Insurable Interest have been held to be unenforceable as a matter of public policy. To do otherwise would be to sanction speculative risks on human life.
- If the major US insurance companies decline to pay out on these policies, the companies selling them will go bankrupt, and the reputation damage will be massive. Do not accept these new entrants into the life settlement field as customers, lest you suffer along with them.
*Readers unfamiliar with life settlements are urged to consult prior World-Check articles on the subject. use the pull-down menu to access them.
The facts and opinions stated in this article are those of the author and not those of World-Check. World-Check does not warrant the accuracy of any facts and opinions stated in this article, does not endorse them, and accepts no responsibility for them.
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