In the early 1980s the settlement market was born when viaticals became popular with people afflicted with AIDS. From that time until today millions of life insurance policies have been sold on the settlement market. Viaticals are no longer as popular as they once were because by definition a viatical is a contract on insureds with a life expectancy of two years or less.
The idea of selling life insurance might have come about with viaticals, but it was an idea long overdue. The life industry had been underpaying insureds for their contracts for the last 100 years. Historically the only options available to someone who wanted to drop their policy were to 1) Get a paid up reduced contract; 2) Take the cash value; 3) Run the contract as long as it would last with the remaining cash value; 4) Convert the contract to extended term insurance.
The settlement industry offered a fifth option. If policy owners needed to drop their contracts because they could no longer afford the premiums or because they no longer had a need for the coverage, they now had another option. Sell the contract and receive a value greater than the cash value. They could also sell term insurance which has no cash value for a percentage of the face amount.
Viaticals were an easy sale in the eighties as many of the people who participated in them were young and had a terminal illness. The gay community was most greatly affected by AIDS and it was the gay community that made the best use of the settlement market. Viaticals were a way to die with dignity by receiving money from your life insurance to pay for medical expenses and hospice care.