Carole Fiedler, owner of Innovative Settlements in Greenbrae, obtains settlements for owners of life-insurance policies through a secondary market.
In April, North Bay Business Journal covered the related viatical market in a story about a Petaluma musician who invested $20,000 of his retirement funds, hoping for a 12 percent return on two life-insurance policies formerly held by patients with AIDS. They defied their calculated life expectancy and derailed the investment.
Life-insurance settlements involve policies with life expectancy more than 24 months; viaticals, less than 24 months.
Here, the Journal spoke with Fiedler on similarities and differences between the viaticals and life-settlements markets.
You have been selling life settlements for how long?
About 26 years, since 1991. That was before there was such a thing as a life settlement. At that time, it was called a viatical settlement, and it was only for people with a terminal illness.
That came out of the AIDS epidemic?
I was representing people primarily with AIDS, but it was available for people with any life-threatening illness.
They would sell their life-insurance policies for whatever they could get?
Exactly. I analyze the policy for buyers, companies in business specifically to buy policies. They come back to me with offers, sometimes multiple competing offers. I work to get the most for my client.
In a viatical settlement, a person with a $100,000 life-insurance policy would get 60 percent on the dollar?
Back in those days, some states regulated the amounts. That does not stand any more. If somebody had life expectancy of 24 months or less, they could expect to get 60 percent of the policy. If it was 12 months or less, they would get closer to 70 percent.
The shorter the life expectancy, the more money my client gets. We look at life expectancy and the premium expense, the cost to maintain the policy for the rest of the life expectancy plus a buffer.
Typically your clients would not be able to afford premiums on their life-insurance policies, or did they need the lump sum to buy medicine or something else in their lives?
In the earliest days, these were primarily people with AIDS. They were working and had large group life-insurance policies through their jobs. Then they get this diagnosis.
This is all before August 1996. We had big change then. Before then, they would go to the doctor and be told, you have AIDS, you have six months to live. So go have a good time. That’s what these people were being told. They found out about this [viatical settlements] because these people spoke to each other, and their doctors told them what to do.
That’s why this took off so well with AIDS, not because AIDS offered us in the industry anything that much different. We had an opportunity. I used to get referrals from the HIV-benefits coordinator in Kaiser [Permanente] San Francisco [Medical Center].
Instead of leaving money to heirs, they would cash in the policy and use the money to go on a trip?
Yes. Unfortunately, a lot of these people were not close with their families. Many of my clients were gay men. Most did not have children. They didn’t have anybody to leave these large policies to.
Many bought cars. There were no strings attached on what they could do with the money.