The purpose of this blog post is to compare structured settlements and personal injury settlement planning. As noted in an earlier S2KM blog post, the transition from structured settlements to settlement planning is one of three fundamental transitions reshaping the structured settlement industry. The other two fundamental transitions:
- From a singular, illiquid, and non-assignable product to multiple products with greater flexibility to address changing needs and circumstances of injury victims;
- From traditional (pre-Internet) to web-based business models, processes and skill sets.
Among statutory definitions, "structured settlement" is defined in IRC 5891 (c)(1) and Section 2(m) of the Model State Structured Settlement Protection Act. Wikipedia offers an additional definition for "structured settlement". Financing diagrams provide a visual perspective for understanding traditional structured settlement financing alternatives and methodologies.
As summarized in this history diagram, structured settlements and the structured settlement industry have experienced significant changes since structured settlements were first utilized in the United States during the late 1970s including:
- The secondary market;
- 468B qualified settlement funds;
- Integration with Medicare and Medicaid; and
- Integration with settlement trusts.
This transaction diagram demonstrates how, as an integrated product, structured settlements have become increasingly complex legally and financially with multiple stakeholders and documents.
One result of this increased integration and complexity has been the evolution of structured settlements from a stand alone product into a core product for a more comprehensive profession called "settlement planning" - which some participants refer to alternatively as "settlement consulting" or "special needs settlement planning".
Although no statutory or standard definitions exist for settlement planning, leading practitioners and advocates, including Jack Meligan and Joseph DiGangi, have offered their own definitions and explanations. In addition, the Society of Settlement Planners (SSP) has adopted the "Standards of Professional Conduct for Settlement Planners" and offers a Registered Settlement Planner (RSP) certification program.
Here is how Meligan, SSP's President, explains settlement planning:
- "Settlement Planning is the modern day [holistic] approach to assisting personal injury (and other types of) claimants with the personal, and highly unique, financial planning decisions surrounding the settlement of their claim.
- "Settlement Planning starts from the premise that structured settlements are not the answer to everything that everyone needs or wants to do with their settlement dollars.
- "Using that as a starting point, the first in a long line of questions for any personal injury claimant to answer is: 'What do you want this settlement to accomplish for you? What is the most important thing? Then, what is the, second most important, third most important, etc'.
- "Only after you, as the claimant, answer the question above should you really begin to craft a plan to help you reach those goals."
- In what he termed "a wake up call for the industry", DiGangi criticized the traditional structured settlement business model and knowledge standards.
- He also outlined his vision for industry transition, improvement and growth which he termed "comprehensive settlement consulting".
DiGangi characterized the current structured settlement industry as "a stagnant market" based upon an outdated "annuity broker" business model. Structured settlement clients and competitors, according to DiGangi, share negative perceptions about structured settlement consultants. As examples of negative perceptions, DiGangi cited the industry's single product offering and limited knowledge base.
As an alternative to the "annuity broker" structured settlement business model, DiGangi proposed a "consultant" model with multiple products and services providing added value for, and with, other settlement stakeholders.
Characteristics of DiGangi's settlement consulting model:
- Planning orientation;
- Solutions before products;
- Blended products and services;
- Product neutrality;
- Compensation disclosure;
- Professional training and designations;
- Comprehensive skill sets and knowledge base.
During his 2009 NSSTA presentation, DiGangi also highlighted several transitional issues: licensing; conflicts of interest; collaboration models; and work process infrastructure.
S2KM will summarize and evaluate how SSP and NSSTA addressed "settlement planning" during their 2011 Annual Meeting educational conferences in a subsequent and related blog post.
Timothy Morbach of The Settlement Services Group (TSSG) developed the linked diagrams in this blog post. TSSG is an affiliate and strategic partner of S2KM Limited. Viewers can enlarge the diagrams to improve their visibility.