How the AIDS crisis helped create a multibillion-dollar death-speculation market

Frank Sierawski didn't set out to discover a multibillion-dollar market for speculating on when people with life insurance policies will die. He stumbled on it by accident, after getting the worst news of his life.

Over a decade ago, Sierawski got diagnosed with a rare form of Stage IV lung cancer.

He has a wife and three kids, and he's thinking about all the time together he's going to miss out on. So he sets what he thought then was an ambitious goal: live seven years.

"That's when I was 35," Sierawski said. "The five-year survival rate is 20%. That seems like I'd be beating the odds. That'd be a big win. I'll take that."

He was obviously worried about how his death would impact his family emotionally, but he was less worried about the financial impact. Because, before his diagnosis, he'd taken out two life insurance policies.

Back then, he understood the basic value proposition of life insurance like many of us do: you pay an annual premium to your insurance company, and if you die while your policy is in force, the insurer pays a big chunk of change to whomever you tell it to. In this case, the money would go to his family.

Sierawski is 47 now. Luckily, his life insurance never had to pay out. He got on a new drug that put his cancer into remission. But he kept paying into those two life insurance policies.

Then, just over a year ago, Sierawski was scrolling through a Facebook group for cancer survivors when he stumbled across a post that would change his whole idea of what life insurance even is. And what it can do.

The post was about a deal where you don't have to actually die to get some of your life insurance money. It's called a life settlement.

Here's how it works: You sell your life insurance policy to an investor for a fraction of the face value of the policy, maybe 20 to 30 cents on the dollar. The company pays the premiums to keep it in force, and when you die, they get the full payout instead of your beneficiaries.

In other words, Sierawski realized his life insurance was more than just a contract between him and his insurer. It was something he could sell.

"It's an asset I didn't know I had," Sierawski said. "Which was like, whoa, mind-blowing."

This is when he gets curious. Because he's a finance guy. He knows these companies want their returns as fast as possible. They make the most money when someone dies the day after they sell their policy. So he suspects his cancer history might net him a better offer.

He fills out some forms online. And that's when his phone starts ringing off the hook.