The U.S. Primary Market for Life Insurance has a volume of more than USD 16 trillion (16,000 billion). It is more than seven times larger than the German market, although only 63% of all Americans hold life insurance policies. The U.S. Secondary Market for Life Insurance had a volume of just USD 2,5 billion in 2003 and USD 5 billion in 2004. The estimated potential of the market is between USD 100 and 240 billion. The current estimated market volume is between USD 5 and 10 billion (Sources: Bernstein Research 2004 / Conning Research & Consulting Inc. / ACLI Factbook 2003).
Dynamics of the Secondary Market
Characteristics of U.S. Life Insurance Policies:
- Can continue in force indefinitely
- Comparatively low surrender values
- Flexibility – policies can be converted, altered
8 % of all U.S. life insurance policies are allowed to lapse because:
- The covered risk no longer exists
- The beneficiary is dead or no longer in favor
- The premiums have become a burden
Policies usually command a value in the Secondary Market that is much higher than the surrender value of policies. Prospectively insurance agents should inform customers of the Secondary Market. By selling on the Secondary Market, policy-holders can cash-in on policies in their own life-time and spend the proceeds as they please.