Disability Law

Growing the Structured Settlement Market

By Patrick Hindert

For the past several years, the structured settlement industry has experienced significant change without any significant overall growth of annual annuity premium. Several structured settlement annuity providers (Aegon, Genworth, Travelers, and Transamerica among others) have left the structured settlement market. The number of individual structured settlement professionals remains relatively constant while their average age continues to increase.

According to some industry experts, traditional IRC section 104(a)(2) structured settlement business has actually decreased since 2001 by as much as $1 billion per year. Their explanation: current structured settlement business (approximately $6 billion of annual annuity sales) now includes substantially more workers compensation cases, attorney fee structures and other non-qualified structured settlement cases. In a related and positive development, structured settlement holding company Integrated Financial Settlements (IFS) announced earlier this month that it obtained a favorable ruling from the Internal Revenue Service on the use of a non-qualified assignment to resolve an employment claim.

Changes impacting the structured settlement industry since 2001 have included:

• New legislation - IRC section 5891; state structured settlement protection statutes; the Deficit Reduction Act of 2005 (DRA); the Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA)
• New communities of practice - settlement planners; special needs planners; Medicare set-aside professionals; and structured settlement purchasers (factoring companies);
• New products - blended settlement trusts; non-qualified assignments;
• New markets - attorney fee structures;
• New technologies - the growth and development of the Internet especially web 2.0.

What explains this lack of growth in the traditional structured settlement market? The potential for growth certainly exists.  According to a 2003 Towers Perrin study (updated in 2005), the economic size of the United States tort industry (exclusive of defense and administrative costs) exceeds $100 billion dollars per year.

In 2006, the National Structured Settlement Trade Association (NSSTA) sponsored a marketing study to address industry growth issues. The NSSTA marketing study consisted of telephone surveys of personal injury claimants and plaintiff attorneys. Robert E. Hoyt, the Dudley L. Moore, Jr. Chair of Insurance at the Terry College of Business at the University of Georgia conducted the surveys. Among the findings and conclusions:

• 75% of claimants surveyed who had received structured settlements said they were satisfied with their structured settlement and 95% of the plaintiff attorneys surveyed said they were proponents of structured settlements.
• And yet, only 7% of personal injury settlements between $75,000 and $100,000 involve structured settlements and only 30% of personal injury settlements above $1 million involve structured settlements.
• Among the possible reasons: plaintiff attorneys, according to NSSTA's study, prefer trust departments and financial planners over structured settlement consultants for purposes of financial planning for their clients.
• NSSTA's conclusion: the structured settlement industry has not done a satisfactory job of publicizing or educating plaintiff attorneys or their clients about structured settlements.

Does the structured settlement industry, or any of its stakeholders, have any strategic plan to grow the structured settlement market?

• NSSTA - As S2KM previously reported in "NSSTA's New Leadership" and "2008 NSSTA Annual Meeting-2", NSSTA has announced a new strategic analytic framework. Although NSSTA's strategic framework lacks specifics, NSSTA has also initiated related strategic action steps:
  • A marketing strategy to promote plaintiff attorneys who have good things to say about structured settlements. The most prominent example is Joe Jamail, "The King of Torts", who is featured in two videos recently published on NSSTA's website. Jamail's message:
    • "Structured settlements protect the needy from the greedy";
    • "Structured settlements provide the ultimate safeguard for settlement funds";
    • "Advocacy should be part of the practice and training of structured settlement professionals"
  • Association relationships with the National Academy of Medicare Set-Aside Professionals (NAMSAP) and the American Association for Persons with Disabilities (AAPD).
  • A Broker Relationship Initiative.
• The Society of Settlement Planners (SSP) - Although SSP has not announced or published any strategic plan to grow the structured settlement or settlement planning industries, SSP has undertaken several strategic initiatives intended to grow these markets:
  • SSP's Standards of Professional Conduct for Settlement Planners;
  • SSP's Registered Settlement Planner Certification Program;
  • Collaborative education programs with the Academy of Special Needs Planners (ASNP);
  • Regulatory initiative to secure U.S. Treasury guidance for single claimant 468B Funds;
  • Educational programs addressing controversial topics related to structured settlement growth - including single claimant 468B Funds; the secondary annuity markets; and problems with Medicaid annuities.
    
• National Association of Settlement Purchasers (NASP) - Some of NASP's members helped organize the 2008 Structured Settlement Thought Leadership Conference to provide an educational platform and open forum dedicated to growing and improving the structured settlement market.

S2KM's contribution to industry discussion about growing the structured settlement market:

• A vision for the Future of Structured Settlements;
• Public educational resources including S2KM's blog and structured settlement wiki
  
• Encouraging all structured settlement stakeholders:
  
  • To think and communicate positively, openly, respectfully and inclusively
  • About strategies to grow and improve the structured settlement market.
     

Full post as published by Beyond Structured Settlements on July 23, 2008 (boomark / email).