Life Settlement Fraud
Life Settlement Fraud Policy Holder Lawsuits
Life Settlement Fraud | Lawsuits, Lawyers | Viatical Settlements, Life Insurance, Investor Fraud Scam, Policy
Have you invested in a Life Settlement that has yet to produce the returns you expected? You could be the victim of a Life Settlement fraud. Also known as Viatical Settlements, or by the morbid monikers "Death Bets" or "Death Contracts,” Life Settlements involve the sale of an existing life insurance policy to an investor, who will pay required premiums on the policy, then collect its proceeds once the insured dies. Usually touted as safe investments, Life Settlements often turn out to be more costly and less lucrative than investors were led to believe.
Among other things, questions have been raised about the methods Life Settlement marketers use to estimate life expectancies. These estimates—a way that they calculate how long the people might have to live— are used to predict a Life Settlement’s rate of return. Our Life Settlement fraud lawyers are seeing more and more cases where life expectancy estimates are being manipulated by the sellers of these investments.
Our firm offers free legal consultations to investors who believe they have been victimized by Life Settlement fraud. If you've been misled about the nature of your Life Settlement investment, you may be entitled to compensation. We urge you to contact one of our Life Settlement fraud lawyers today.
A Life Settlement is a financial transaction where an investor buys a life insurance policy from the policy owner for compensation less than the expected death benefit under the policy. The investor then makes any required premium payments and holds the policy until the death of the insured, at which time the investor is paid the death benefit under the policy. These products started to get public attention when the terminally ill, most notably AIDS patients, started to sell their life insurance policies to raise cash for medical and living expenses. Now, policy sellers are mostly the elderly, typically age 65 to 85 with a life expectancy of 144 months or less.
Life Settlements have become an increasingly popular investment product. In 2005, the Life Settlement industry was estimated at $5.5 billion. In 2008, it had grown to $11.8 billion, according to the Financial Industry Regulatory Authority.
In 2009, the Government Accountability Office (GAO) warned consumers about participating in life-settlement transactions "due to a lack of clear, consistent state oversight." The GAO noted that 12 states and the District of Columbia have no laws or regulations pertaining to Life Settlements. According to the North American Securities Administrators Association, which represents state securities regulators, Life Settlements are vulnerable to various types of fraud, including: Ponzi schemes; phony life expectancy evaluations; inadequate premium reserves that increase investor costs; and false promises of large profits with minimal risk. In 2009, Life Settlements made it to the association’s most recent list of the top 10 investor traps.
Life Expectancy Estimates
The rate of return for a Life Settlement investment depends on how long the insured lives. Basically, the sooner the original policyholder dies, the better for the investor. On the other hand, if the insured outlives the life expectancy estimate, the investor must continue to pay premiums on the policy, which cuts into their eventual earnings. What's more, the shorter an insured’s life span is expected to be, the more the firm selling the investment can charge clients for that policy.
All too often, the life expectancy estimates provided by brokers of Life Settlements don't reflect reality. For example, in 2002 Life Partners Holdings, a Texas-based seller of Life Settlements, put a life expectancy of two years or less on the insured person in a third of the 297 policies it sold, and four years or less on all but a handful. According to the Wall Street Journal, if the projections were accurate, almost all of those policies should have "matured," with the insured dead, by the end of 2009, but instead the insured had outlived the estimate in 283 of the 297 policies.
Among other things, the Journal reported that Life Partners Holdings gets life expectancy estimates “from a doctor in Reno, Nev., who has testified for a court case that he never checks the accuracy of his prior predictions." Life Partners methodology for estimating life expectancies is now the subject of an investigation by the U.S. Securities and Exchange Commission.
Unfortunately, regulation of the industry - particularly in how it estimates life expectancies - is sparse. There are no minimum requirements as to who may generate these reports or projections. This state of affairs makes it all too easy for the marketers of Life Settlements to mislead potential investors about the value of these products.
Legal Help for Victims of Life Settlement Fraud
If you were induced to invest in Life Settlements because of misleading life expectancy estimates, you could have valuable legal rights. We urge you to contact one of our Life Settlements fraud lawyers today by filling out our online form or calling 1-800-YOURLAWYER (1-800-968-7529) to discuss your legal options.