Viatical & Life Settlements
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Mortality at Older Ages

Are you considering an investment life settlements--policies that insure people who are elderly? If so, you need to know that you cannot gamble on old age as the determining factor that will result in a profit.

Imagine if you had invested in a policy that insured an eighty years old man. If he was like Bob Hope, he would live past his 100th birthday.

Companies that specialize in life expectancy estimates are hard pressed to come up with a reliable method of making these predictions. One problem is that the insurance industry itself has little data about the mortality of older aged people. Throughout its history the insurance industry would extrapolate from data about younger ages in order to predict mortality of older insureds. But recent studies show that criteria to determine the mortality of older aged people is not the same as for younger people. In some situations, what may shorten life at age 40 may actually improve life expectancy at age 70. (See excerpt from "Viatical & Life Settlements: An Investor's Guide."

Now there is a new study, one that claims to be the most comprehensive as well as the largest study ever done about mortality experience at older ages. This study, conducted by The Tillinghast business of Towers Perrin, was conducted in the fall of 2004 and included data from 38 life insurance companies.  It covered a period of 25 years and policies that would have paid a combined total death benefits of $3.355 trillion. One finding was that cancer was the leading cause of death by face amount (death benefit).

This study will have significance for life settlements as well as insurance companies. Other studies and some of the interesting findings are described in  "Viatical & Life Settlements: An Investor's Guide."  (Note: The scientific jargon used by researchers is translated into easy to understand language.) 

Another study by actuaries shows that older insureds who have a serious health problem and who have whole life policies probably will not benefit from selling their policies to a life settlement company. Due to the limitations of this study, it has been heavily criticized by the viatical and life settlement industry. See what you think.

A third piece of interest is the article by John Skar, an actuary and vice president at Massachusetts Mutual, who addresses whether older insureds should keep or sell their life insurance.

The above articles are reprinted with permission.

Debate is beginning on this important issue.

We welcome your opinion. With permission, we will reprint them on this Web site. 

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