The Life Insurance Policy Exchange has introduced a fast track option – allowing policyholders to get their money within days - and is revamping its website to encourage financial advisers to recommend its services.
The recently introduced Fast Track option means policyholders who need cash quickly might be able to receive their policy’s surrender value within three to five days, LIPE managing director Greg Donnison says.
An additional payment the exchange generally makes on top of the surrender value is calculated and paid out once full due diligence is completed, he says.
The website revamp, due to be completed later this year, is part of LIPE’s plan to build relationship with insurers and advisers to ensure the policy-trading option is brought to clients’ attention, Donnison says.
The exchange offers an alternative to policyholders wanting to cash in their whole of life or endowment policies. It pays up to 20% more for aa policy than its surrender value, with the average extra pay-out being 5%. The policies are then sold to investors as a low risk, interest-based investment, under the name Traded Endowment Policies (TEPs).
About 85% of the 500 policies – worth $5 million - traded through the exchange last year were referred by advisers, with 10% coming directly from life companies.
"We believe there is considerable scope to increase this further by developing relationships with life companies, and financial and risk intermediaries. By developing the market in this way, we can be assured that all options have been explored prior to the decision to surrender by the policyholder."
A referral fee of up to 2 percent of the net surrender value paid out.
Currently, the exchange sees less than 5% of the 30,000 policies, worth $709 million, which are surrendered each year.
LIPE handles life and endowment polices with AMP, AXA, Tower and various brands under the Sovereign banner – which cover about 85% of the traditional policy market.
Donnison says a recent fall in interest rates has had a positive impact on demand for TEPs
"The 15 year product is becoming increasingly popular for education and retirement planning purposes where the investor requires capital growth rather than income."
The exchange, running for seven years, has a criteria list to decide whether a policy can be traded and what additional value will be paid on top of the surrender value.
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