The Life Insurance Policy Exchange (LIPE) is expanding its market to include policies issued by National Mutual, Tower Life and NZI Life (now Colonial).
LIPE offers policyholders another option for cashing in their whole of life or endowment policies, buy buying them at a price higher than the surrender value offered by the life office, then repackaging them as a low risk, medium term investment offering returns of 6.5 per cent (9.7 per cent pre-tax).
LIPE says investors using the secondary market for life policies can obtain cash payouts of between 3 per cent and 20 per cent more than the surrender value. The average payout is 6 per cent more than surrender value.
Previously the exchange only dealt with policies issued by AMP as they were the ones which offered the best returns.
Managing director Greg Donnison says now that interest rates, and fixed interest returns, have fallen LIPE can now competitively package policies from these other companies.
He says together with AMP these five companies account for almost 85 per cent of the traditional life insurance policy market.
"With surrenders and lapses numbering between 25,000 and 30,000 policies each year at an estimated total cash value of $500 million, this represents a significant expansion of the market."
LIPE has established a criteria list for each of company which determines policy suitability based on its size and when it commenced. This varies from company to company. For example National Mutual policies taken out after 1960 with a surrender value (before any debts) of $15,000.
Since 1994 LIPE has bought policies off almost 2000 AMP policyholders for nearly $20 million.
The Life Insurance Policy Exchange (LIPE) is expanding its market to include policies issued by National Mutual, Tower Life and NZI Life (now Colonial).