As an aftermarket, the industry of life insurance is fairly new. However, the life insurance industry has a history that spans further than 100 years. The life settlement industry emerged after numerous, integral judicial events and people really understood life insurance history.
In 1911, the U.S. Supreme Court designated al life insurance policies as private property, in the case of Grigsby v. Russell. According to justice Oliver Wendell Holmes, a life insurance policy encompasses all of the traits of personal property. Therefore, it possesses full functionality of an asset. He even portended that life insurance would become an exceedingly profitable investment in the near future.
As a result of such rulings, life insurance became tantamount to stocks and bonds, and was placed on the same pedestal as other investment property. Like other forms of investment property, one may transfer a life insurance to another entity.
Like other assets that are often transfer, life insurance policy owners were then accorded certain rights along with this ownership.
In the 1980s, the United States was plagued by the insidious AIDS epidemic, which significantly decreased the life expectancy of all who were afflicted by this illness. Hence, they no longer required their life insurance policies. After this outbreak of disease, the settlement industry emerged in the viatical market. Viatical settlements are reserved for chronically or terminally ill individuals who intend to sell their policy for a lump sum payment. Once the buying entity owns the policy, they are responsible for the premiums and receive the death benefits once the seller has succumbed to illness.
The viatical settlement industry experienced a decline once the AIDS infected population increased their life expectancy through novel, medical developments. This gave rise to the lucrative life settlement industry. In this context, the insurer must exceed the age of 65, and should not be affected by a chronic or terminal illness.
In the year of 2001, the National Association of Insurance Commissions introduced an act intended to discourage fraud and institute fair business practices. This was ascribed as the Viatical Settlements Model Act. During this time frame, life settlement agencies embarked upon their purchases of life insurance policies in order to increase their business investments.
These corporations transformed the notion of life settlements into a shrewd method of wealth management for insured individuals who no longer required a policy.
In the year of 2009, the United States Senate Special Committee on Aging determined that life settlements typically produce eight times more than the cash value supplied by life insurance companies.