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Fintech Opens Up a Market for FIs: Lending Against Life Insurance

Authored By: Lewis Wood on 9/23/2022

Source: American Banker

Many people buy whole life insurance as protection for their beneficiaries after they die. Josh Wyss also sees it as a savings vehicle during his lifetime.

Wyss co-founded a fintech called Inclined that helps banks participate in this form of lending. Although the asset is extremely low risk for the lender, because the cash value of the policy serves as collateral, Wyss's research has found that only a few banks in the country underwrite lines of credit against whole-life policies. He estimates 90% of the market for these loans is conducted through the life insurance carrier.

Inclined, which announced on Friday that it had raised $15 million in its Series A funding, aims to solve this problem for banks. It already has Mechanics Bank in Walnut Creek, California, onboard, and two to four more financial institutions are expected to launch in the coming quarters. Some are attracted to the lossless characteristic of the loan, while others hope these loans will seed new customer relationships, according to the company. Wyss believes that banks are better equipped than whole-life carriers to make these loans because they have a lower cost of funds than mutually organized insurance carriers.

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