Role of Life Expectancy Providers
Life expectancy providers are independent firms that produce longevity estimates on the insured's of policies proposed for life settlements, viaticals, senior settlements, and senior life settlements. Each longevity estimate typically costs between $250 and $750 and as many as three or four are required in order to execute a life settlement. The life settlement broker or life settlement provider usually covers this cost.
Importance of Life Expectancy Estimate
A longevity estimate is one of the most important pieces of information used to value a life insurance policy for a life settlement. This is because it helps the buyer determine when they are likely to receive the life settlement insurance proceeds and the future premiums payable up to that point. By taking into account the insured's life expectancy, the future anticipated premiums, and their required rate of return buyers calculate how much they can afford to pay a policy owner for their policy. In general, the shorter the longevity estimate (life expectancy), the greater the value of the policy and the more a buyer will pay for it.
What Does a Life Expectancy Estimate Represent?
A longevity estimate is based on a mortality curve of 1,000 people whose age and medical conditions are the same as the insured's. A life expectancy provider calculates the longevity estimate to represent how long the insured will live relative to the past statistics about others.
Accuracy of Life Expectancy Results
Every life expectancy provider has come under recent scrutiny over the accuracy and reliability of the process it follows to produce a longevity estimate. This is because every life expectancy provider has recently revised its longevity estimate process due to evolving mortality experience at older ages. As a result, some in the industry are insisting each life expectancy provider have its longevity estimate underwriting methods verified by an independent actuarial consulting firm. At least one life settlement association is also sponsoring an effort to develop uniform standards for life expectancy providers.
Live Expectancy Provider Registration Requirement
Some states require life expectancy providers to register and provide information about their business. Any reports filed by a life expectancy provider are public information and can be obtained from the state's insurance department. Among other statements, these reports may contain an assessment of the provider's past performance modeling life expectancies.
