Funds for Living
Helping terminal patients and families now
While the technology of health care in the US is among the world’s best, its cost by most reckonings is the highest in the world. This, combined with many seriously ill patients’ inability to maintain their income, makes finances for many terminally ill Americans extremely difficult—indeed, potentially ruinous, as the challenge of paying for health care, paying other bills, maintaining a reasonable quality of life aside from the illness, and providing for family members mount.
At the same time, there is a financial asset that many seriously ill Americans have that may seem inaccessible—but only because an understandable, consumer-friendly program for accessing this asset had not been developed. This is a gap that Arena, along with a joint venture partner, stepped in to fill.
One of the financial products offered in this Arena joint venture is a niche version of “life settlements”—where an insured person can access a portion of the future benefits of a life insurance policy now, while still alive, rather than letting the policy lapse (from lack of funds to pay premiums) or waiting for a payment to the estate upon death. There is already a fairly sizable life settlement industry that invests in policies of seniors on a pool-based level, often tied primarily to customers’ age and family health history. But what has been lacking is a rigorously scientific, and therefore fair to the customer, program for allowing the terminally ill to reliably do the same.
To make life settlements for the terminally ill attractive and fair for customer and investor alike requires thoroughly assessing the longevity prognosis of individual applicants. This requires understanding of specific diagnoses, diseases, and treatments; close evaluation of medical records by specialist physicians; and a systematic approach to risk management that makes a relatively small pool of specialty investments neither too conservative nor too risky.
This is exactly the rigor and specialist expertise brought by Arena’s partner in this joint venture. With several decades of experience developing methodologies to evaluate policy loans (in which terminally ill patients can borrow against future life insurance proceeds, a structure that may have distinct tax benefits for the borrower) and policy acquisitions (where the policy is bought outright, freeing the insured from having to make any additional premium payments), our partner can offer certain patients and their families a flexibility that they otherwise would not be offered.
When this joint venture began three years ago, our modest initial goal included funding advances against about 100 or so policies of terminally ill people per year—totaling perhaps $20 million per year—a scale that we thought wise in establishing the platform, and one that many lenders would not spend the time on, given the overall smaller size. But true to our commitment to seeing what’s possible for counterparties and for investors, we believed that the benefit of such funding for ill Americans would prove itself out and point the way to a larger program benefiting many more people.
And it has. The company we funded now boasts having provided more than $300 million of life insurance loan and acquisition advances to the terminally ill in just those first three years, with 90% of those customers likely still able to leave money for their loved ones, and in the process helping alleviate the terrible stress of having to prioritize among health, family, estate, and life.