In an interesting article in the Wall Street Journal, the Life Settlement industry was featured in a profile piece that discussed the rapid growth and controversy surrounding this unique market.
For the uninitiated, the Life Settlement business is one where brokers purchase life insurance contracts from policy holders who no longer wish to own their contracts, but don't want to cash them in or surrender the contracts. It is very similar to the factoring industry that is such a large part of the settlement industry and I can see how this new area is going to start to over lap the interests of the settlement industry as well.
I see a lot of parallels to where the factoring business was about ten years ago, which is that it is largely unregulated, has little pricing control or consumer protection and big intermediaries are starting to enter it seeing big profits.
The over lap with the structured settlement industry is that just as with cashing in an annuity early, selling your life insurance contract early comes with substantial risk as it is an obscure market where pricing varies widely. As with most factoring deals, the policyholder would usually be better off hanging on the policy, but is induced to sell by needs for cash or ignorance. Settlement planners and brokers need to educate themselves on how this business works, it's draw backs and short comings, the regulatory issues involved and who to call when a client eventually contacts you about selling their contracts.
It's a great article, lengthy and well researched and well worth your time.