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Disability Law: Beyond Structured Settlements
Business Standards and Practices - 3
By Patrick Hindert
This S2KM blog post summarizes the emerging business and professional models that are competing with the traditional structured settlement models. It continues S2KM's series analyzing structured settlement business standards and practices.
- Business Standards and Practices-1 highlights historical events that helped to develop traditional structured settlement business and professional models.
- Business Standards and Practices-2 addresses two strategic issues:
- What are the traditional structured settlement business and professional models?
- What problems have traditional structured settlement models created that have restricted industry growth?
- Subsequent S2KM blog posts will address differences between the new structured settlement business standards and practices and the business standards and practices associated with traditional structured settlement models.
The traditional structured settlement "claim management" business model and "annuity broker" professional model are being challenged by a more comprehensive and customer-centric "settlement planning" model. Settlement planning, sometimes referred to as "special needs settlement planning" or "settlement consulting", proposes a different set of business standards and practices than traditional structured settlements. Although structured settlement "annuity brokers" participate in the settlement planning market, other product and service providers also participate. Individually or collectively, all of these professional participants may be referred to as personal injury or special needs "settlement planners" or alternatively as "settlement consultants".
The Society of Settlement Planners (SSP) has become the preeminent architect of and advocate for the settlement planning business model. In 2008, SSP adopted and published its "Standards of Professional Conduct for Settlement Planners". The Preamble (subtitled: "A Settlement Planner's Responsibilities") to SSP's Standards of Professional Conduct incorporates the following descriptions of settlement planners:
- "A settlement planner is a representative of a person participating in the design, negotiation and implementation of a settlement or satisfaction of a judgment for the benefit of a person claiming a legal entitlement to an award of damages or other compensation."
- "A settlement planner may represent a plaintiff, a defendant, an insurer, a guardian ad litem, an heir of a claimant, an attorney, or another person participating in the settlement process."
- "Settlement planners may provide advice and other services to their clients concerning claim valuation, negotiation strategy, the determination of rated ages based upon impaired life expectancy, life care planning, ..., allocation of proceeds, taxable and non-taxable periodic payments, structured settlements, [Medicaid and Medicare preservation], investments, irrevocable trusts, assessment of a plan's financial risk, and estate liquidity for tax planning.
- "....[T]o the extent permitted by these rules, [settlement planners] may provide advice and assistance to payees in connection with the factoring of a structured settlement plan."
- "Settlement planners may also play other roles ...such as a lawyer representing a claimant or obligor, a financial planner, an annuity broker, or a sales agent for an issuer of an annuity or provider of trust-based investment management products."
Although the settlement planning market encompasses the structured settlement market, it is substantially larger and more complex. Based on market surveys, estimates of the total annual U.S. market for potential personal injury settlement planning products exceed $160 billion (source: Towers, Perrin Annual Updates of U.S. Tort Cost Trends) compared with a current annual primary structured settlement annuity market of less than $6 billion.
Because the settlement planning market is emerging and its definition is complex with multiple professional participants, settlement planning education, certification and business models are still evolving. Settlement planning business models are also subject to change based upon continuing legal, technology and product developments.
Among professional primary market structured settlement participants, both SSP and the National Structured Settlement Trade Association (NSSTA) offer educational programs featuring settlement planning components. SSP's annual educational conference is open to non-SSP members and SSP encourages attendance by non-SSP settlement planners. NSSTA's educational conferences are restricted to NSSTA members and focus more narrowly on structured settlement topics.
Beginning in 2007, SSP has offered the only settlement planning certification program, the Registered Settlement Planner (RSP). NSSTA's Certified Structured Settlement Consultant (CSSC) program includes settlement planning components. Associations composed of other settlement planning professionals, including special needs attorneys, Medicare set-aside professionals, life care planners and structured settlement transfer companies, offer settlement planning and structured settlement presentations as part of their educational programs.
How does the emerging "settlement planning" business model differ from the traditional structured settlement "claim management" model? From a structured settlement perspective, the settlement planning business model is more claimant-controlled and customer-centric and subject to greater supervision than the traditional structured settlement claim management business model. Here are some of the developing characteristics:
- IRC 468B Qualified Settlement Funds represent the standard funding model for complex cases;
- Multiple settlement funding product alternatives exist including structured settlement annuities;
- Funding product selection and court approval are determined by "best interest", "suitability" and/or "prudent man" standards;
- Settlement planners offer insurance and non-insurance products and services, requiring additional licenses, training and credentials, to satisfy legal requirements and to meet competitive qualification standards;
- Structured settlements are increasingly:
- Integrated with other government benefits;
- Payable into trusts or custodial accounts which include other financial products; and
- Construed as a separate asset class when measuring their interactive effects on an integrated, comprehensive settlement plan;
- Personal injury claimants have the right to:
- Select their own structured settlement and/or settlement planning consultants, agents, brokers and product providers;
- Full disclosure and written informed consent concerning:
- Product and service provider compensation, fees and conflicts of interest;
- Structured settlement laws including case-specific state protection statutes.
For comparable characteristics of the traditional structured settlement business model, see Business Standards and Practices-2.
For S2KM's continuing analysis of structured settlement business standards and practices, see S2KM's structured settlement wiki.
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