Last week we received a very nice article published in The Huffington Post: Genomic Technology May Turn GWG Life Into an Insurtech Disrupter. The author picked up our story about our use of Dr. Horvath’s Mortality Predictive Technology stating:
One Minneapolis insurance executive — Jon Sabes of Minneapolis-based GWG Holdings (GWGH) — thinks he has the key to change that, believing emerging genetic research about life expectancy to be crucial in reshaping the industry. The research finally gave Sabes the trump card he believes he needs to drive innovation in an industry steeped in managing risk.
As an entrepreneur, I am engaged in the daily trench of working to build our company and create shareholder value in every way possible. So sometimes, I miss a signpost of growth. The article was great recognition of the work we are accomplishing in this exciting aspect of our business.
I appreciated the author’s inclusion of the funny quote by Tom Nodine when referring to the underwriting system used by the life insurance industry:
“Actually, the current system dates back to the Sumerian city of Ur in 2,000 B.C.,” quipped longtime insurance industry executive and analyst Tom Nodine, when asked about the actuarial principles guiding the $354 billion life and health segments of the U.S. life insurance industry.
The life insurance industry is a place where change does not come easily, and for good reason. But that does not mean that when there is a good reason for change, the industry should ignore it either. Using actuarial predictive technology is a cornerstone of life insurance, and when a better technology comes along, its time to get on the bus. Dr. Horvath’s ability to create an age acceleration measure based on measure methylation levels is remarkable. These methylation levels change based upon the foods we eat, the chemicals we are exposed to, and the exercise we engage in. In other words, reading the amount of molecular methylation occurring in your body is the most advanced way in which to assess your overall health and wellness.
One point of clarity regarding the Huffington post’s article and Elizur Wright. Elizur Wright is the renaissance man credited as the “father of the life insurance industry” in the United State. Elizur is credited as the father because he created the modern-day regulatory framework requiring insurance companies to maintain statutory capital reserves and offer surrender values to policyholders. Wright was driven to change the industry after witnessing the existence of a secondary market for life insurance policies when visiting London. Back then, there were no surrender values offered to policyholders and insurance carriers routinely went bankrupt.
Check out this a picture of the advertisement taken from Wright’s book: Politics and Mysteries of Life Insurance published in 1878. In his book, Wright actually includes a copy of an advertisement taken from the Daily Telegraph on 1871 that describes a portfolio of 42 life insurance policies for sale. The fact that a secondary market for life insurance policies can trace its roots to Elizur Wright is astonishing to me. There are some other funny aspects of Elizur’s observations in his book, but we will save that for another post someday.
The fact that insurance carriers were going bankrupt and policyholders not receiving the value they paid into their policies was maddening to Wright. Elizur actual goes through, and publishes, detailed calculations as to what he thought the policyholders were entitled to receive and the amount of statutory capital the insurance company should maintain. It’s really amazing what he did – he built is Arithmeter to help insurance companies make these calculations and sold a few back in the day! Wright was impassioned correct the wrongs or inequities he perceived through the creation of the modern-day regulatory landscape.
The parallels of where we are at in our business cycle of growth and development, and how we find our start in the secondary life insurance market like Wright is just uncanny to me. We witness grossly inadequate surrender values offered to policyholders (or we would not have a business). By the way, we have returned over $350,000,000 more than the surrender values offered to policy holders on those policies we have acquired. I tend to think about the secondary market as a private solution that addresses an industry problem that the regulatory regime does not. This market is a great example of how entrepreneurial innovation can create value and remedy an inequity where government was unable.
Thank you helping to the Huffington Post for sharing our story!