Senior claims executives of property and casualty insurance companies have represented one of the most important advocate groups supporting structured settlements since the concept was first introduced in the late 1970s.
During 2014, the National Structured Settlement Trade Association (NSSTA) commissioned a survey of senior claims executives as Part 1 of a three-part survey project, conducted by CLM Advisors, which also included claims professionals (Part 2) and plaintiff attorneys (Part 3).
The purpose of NSSTA's survey of senior claims executives was "to generate ideas and a foundation for developing an effective marketing strategy for this industry segment."
This purpose complements the more recent NSSTA "Industry Growth Initiative" which is "designed to identify opportunities to expand the use of structured settlements and bring those opportunities to the structured settlement industry marketplace."
NSSTA's survey of senior claims executives confirmed continuing support among survey participants for structured settlements as well as their perception that structured settlement consultants add value to the liability insurance claims process. 100 per cent of the senior claims executives who participated in the survey said their companies could do more to proactively use structured settlements.
In two prior blog posts, S2KM summarized NSSTA's survey of senior claims executives and discussed the importance of metrics and analytics in formulating an improved and updated marketing strategy for this strategic group of structured settlement advocates. This blog post offers additional S2KM commentary about selected findings from the NSSTA survey.
Structured Settlement Value Propositions
SURVEY FINDINGS: The strongest value propositions for using structured settlements, as viewed by the survey participants: 1) addressing future medical expenses; 2) "needs-based" negotiation; 3) addressing future lost wages; 4) adds no additional work.
S2KM COMMENT: In serious personal injury cases, "needs based" negotiation, as well as proactive defense of damages, are both premised upon economic loss analysis, life care planning and damage allocation. Preparation of the necessary, related work product generally is assigned to outside experts - including structured settlement consultants who are traditionally compensated by contingent commissions paid by annuity providers. Nevertheless, the "strongest value propositions" (1-3) identified above do add additional work and costs to traditional claims practices. If properly implemented, however, these same structured settlement propositions should achieve justifiable reductions in claims costs. To sustain these positive survey findings, structured settlement consultants should consider recommending and helping to implement appropriate metrics and analytics.
SURVEY FINDINGS: Although still in agreement, survey participants viewed two traditional structured settlement value propositions less strongly: 1) lower claims payouts; and 2) earlier claims resolution.
S2KM COMMENT: "Lower claims payouts" and "earlier claims resolution" represent two of the most important traditional justifications for defense utilization of structured settlements. These survey findings suggest structured settlement consultants should either: 1) adjust their traditional sales presentation to senior claims executives; or 2) recommend and help implement appropriate metrics and analytics to support these justifications.
SURVEY FINDINGS AND S2KM COMMENTS: Survey participants disagreed with the following structured settlement value propositions:
- Achieve earlier settlements - This finding appears to repeat (with even less support) the survey finding above for "earlier claims resolution".
- Benefit to society - Historically, in S2KM's experience, senior claims executives have been strong supporters of the public policy justification for structured settlements - i.e. that structured settlements prevent the dissipation of lump sum settlements. The most likely explanations for this change in perspective: 1) factoring; 2) how structured settlement consultants discuss factoring with their clients generally and, for purposes of this survey, with senior claims executives specifically. In S2KM's opinion, growing the structured settlement market will require structured settlement consultants to become better informed about the secondary market and to more positively incorporate references to the secondary market into their selling proposition.
- 35 per cent savings on MSAs - This finding probably can be explained, in part, by use of the number "35 per cent" - the questionable use of an unsupported metric in a survey question. The structured settlement industry has a bad habit of using unsubstantiated metrics to support the sale of their product. For Medicare set-asides (MSAs), this is both unnecessary and easily correctable. Unnecessary because, at least for workers compensation MSAs, CMS has provided structured settlement annuities with an inherent cost advantage compared with lump sums. For details, see this prior S2KM blog post. Correctable, assuming NSSTA offers its members an educational program explaining this cost advantage so that NSSTA members, in turn, can better educate senior claims executives and thereby increase structured settlement sales.
- Equally effective on smaller and larger claims - One key related question is whether, and to what extent, structured settlement consultants, annuity providers and property casualty insurers want to pursue structured settlements on "smaller" claims - and what constitutes "smaller" for this consideration. In other words, based upon past experience, what is the cost-benefit breakeven claim reserve or annuity premium number for each of these three stakeholder groups?
Structured Settlement Consultants
SURVEY FINDINGS: 90 per cent of the survey participants believed: 1) consultants do a good job of describing their value; and 2) involvement of a structured settlement consultant made a case more likely to settle. Two thirds of the survey participants believed that front line claims professionals in their organizations shared their perspective on a consultants' value. Yet, survey participants, on average, believed their companies utilized structured settlement consultants in only 66 percent of appropriate cases.
S2KM COMMENT: There are several possible explanations for the apparent under utilization of structured settlement consultants. For examples: The "seat of the pants" 66 percent metric could be wrong and would be worthwhile confirming. Senior claims executives and front line claims professionals might not necessarily share the same perspective on the value of a structured settlement consultants. See S2KM's subsequent blog review of NSSTA's survey (Part 2) of claims professionals for more details.
- Survey participants viewed consultants' primary value proposition related to their knowledge of, and ability to sell, structured settlements.
- Two thirds of the survey participants believe that consultants skills have stayed the same, while the other one third say the skills have improved, when compared to 10 years ago.
S2KM COMMENT: Results (including the findings below) from NSSTA's survey of senior claims executives suggest the need for structured settlement consultants to improve their skill sets and services including: 1) identifying, developing and implementing metrics and analytics; 2) adding and/or improving: claim management advice and evaluations; negotiation facilitation; MSA and online services.
Additional Marketing Feedback
- Survey participants would value more educational and informational services from structured settlement consultants on such topics as: 1) their facilitation roles; 2) MSA requirements; 3) structured settlement benefits; 4) internal rates of returns; 5) industry developments and trends; 5) case specific advice including post-mortems and how claim handlers perform.
- Other recommendations: 1) expand Medicare services; 2) add online resources to price benefits; 3) obtain references from defense counsel.
S2KM COMMENTS: Industry developments and trends include complex and controversial issues which sometimes create potential conflicts of interests for NSSTA members with their clients. Examples relating to senior claims executives could include: lawsuits against defense brokers; fiduciary standards; single claimant QSFs; re-cycled structured settlements. True professionals will know when and how to address such issues to keep senior claims executives properly informed to protect and promote their own (senior claims executives') company interests - before their clients learn about these issues, or receive more helpful advice, from competitors or other sources.
In subsequent blog posts, S2KM will summarize and evaluate Part 2 (claim professionals) and Part 3 (plaintiff attorneys) of NSSTA's recent three-part survey project.
S2KM summarized historic structured settlement surveys which preceded NSSTA's three-part survey project in this prior blog post.