You wouldn’t think two millennials would disrupt a market that doesn’t technically apply to them, but you’d be wrong. That’s exactly what recent Stanford grads Peter Colis and Lingke Wang are doing. I decided to reach out to them after reading a feature in Forbes which talked about their recent disruption.
Colis and Wang are the founders of life insurance settlement exchange Ovid Life. The company works to match policy holders with institutional buyers in a manner that could be compared to LendingTree but for life insurance settlements.
Those 65 or older hold the majority of the face value of policies. As of 2015, that totaled $57 billion.
So how did a couple 20-year-olds come into an industry that hardly affects their generation?
“We’re both pretty big nerds and found the concept of life insurance really interesting,” Wang told me via email. “I bought my first life insurance policy after meeting an alumnus from my school when I was 23 primarily for investment purposes. This was my first insight into the inefficiencies of the industry.”
Wang was an Economics major and Colis had experience in the industry thanks to his family who owns a brokerage.
Here is the problem that Ovid Life is looking to solve
Many policy holders allow their policies to lapse, either because they cannot afford it or they simply forget to pay the premiums. Others sell their policies through life insurance brokers but only collect about 20% of the value and pay about 6% in fees to the broker.
“On a high level, we want to help people who no longer want to keep their life insurance policies,” adds Wang. “People’s financial needs and situations change over time – and while a policy might have been right 20 years ago, it may no longer fit today.”
Traditionally, people go in person to a broker to sell their policy. No problems there, but Colis and Wang found a way to disrupt the sector. According to Wang, making it easier to sell a policy is the key.
“By simplifying & automating the process, we can make getting a life settlement faster, cheaper, and more transparent for the consumer and hopefully net them a higher sale price.”
In order to maximize returns, many brokers don’t deal with policies unless they are $100,000 or more. This leaves many people out of the loop. Eventually, Wang said the goal would be to have a centralized exchange where people can sell their life insurance policies with a lower face value.
“In a perfect world, we’d want to see a centralized exchange for life insurance,” says Wang. “One where sellers can easily input their policies, and buyers would transparently bid on them in an auction.” However, he admits there are still challenges.
“The biggest hurdle towards this are differences among buyers’ processes. Different buyers have wildly different processes and timelines. Some require certain documentation that others don’t. Some want to send a personal medical examiner to the customer.
Some simply have a longer review process than others. We want to get as close to our ideal as possible but have to also recognize the reality that it’ll take time and many intermediate steps.”
Wang and Colis are still developing Ovid Life to make it easier for people to sell their policies. In the meantime, Wang has a piece of advice for all aspiring entrepreneurs.
“If you are truly serious about starting a company, do it sooner rather than later. It’s a lot easier to start a company when you have little baggage and little responsibility. Failure is also less serious and a lot easier to recover from when you’re young.”