The National Structured Settlement Trade Association (NSSTA) recently announced an "Industry Growth Initiative" - "which is designed to identify opportunities to expand the use of structured settlements and bring those opportunities to the structured settlement marketplace."
Among the structured settlement growth opportunities, expanded use by traditional stakeholders represents one priority - a priority which NSSTA highlighted during 2014 by commissioning CLM Advisors to conduct a three-part survey of senior claims executives (Part 1); front line claims professionals (Part 2); and plaintiff attorneys (Part 3).
S2KM previously summarized and analyzed Part 1 of NSSTA's survey consisting of senior claims executives from ten leading insurance carriers "of varied size ... whose book of business and style of operation lends itself to the use of structured settlements" and who do not underwrite their own structured settlements.
This blog post compares and comments upon selected findings from Part 2 of NSSTA's survey (Front Line Claims Professionals). Results of NSSTA's Part 2 survey were first reported to NSSTA members at NSSTA's Fall 2014 Educational Conference, by Jeff Livingston, Susan Clark and Taylor Smith. The results were also summarized in an article titled "Understanding Structured Settlements", written by Kevin Silo and Taylor Smith, which appeared in the May 2015 issue of "Claims Management" magazine.
Part 2 of NSSTA's survey was titled: "What P&C Claims Professionals Think About the Value of Structured Settlements and the Consultants They Work With." It consisted of 103 responding front line claims professionals, 97% of whom had more than 8 years of claims experience. The participants represented 14 insurance carriers which, although "diverse in size, lines of business, and geographic focus", do not utilize affiliate life companies to write structured settlement annuities. S2KM has made no attempt to determine the extent to which the insurance carriers involved in the first two NSSTA surveys overlap.
As the summary and analysis below indicates, there appear to be multiple and significant disconnects between how front line claims professionals and senior claims executives view structured settlements and structured settlement consultants. To reconnect these two groups of important structured settlement stakeholders and improve industry performance more generally, S2KM recommends increased prioritization on program analytics and metrics.
For defense brokers, the most troubling, yet opportunistic, results of NSSTA's Part 2 survey appear to be: 1) the surprisingly low percentage of front line claims professionals who believe the involvement of a structured settlement consultant makes a claim more likely to settle; and 2) the relatively low rating they give to the helpfulness of attendance by consultants at settlement conferences and mediations,
Additional strategic questions defense brokers should be asking themselves following NSSTA's Part 2 survey: 1) how can they help improve their clients' structured settlement educational programs? and 2) what new, unique "value added" knowledge, if any, will they provide to their clients, customers and other settlement planning professionals in the context of a changing legal and claims environment?
S2KM SUMMARY AND ANALYSIS - Selected NSSTA Part 2 Survey Questions and Responses - with Comparisons to Part 1 Survey Responses from Senior Claims Executives
Does your organization have a formalized program which requires you to use a specific structured settlement company or consultant?
- RESPONSE: 45% do not or do not know.
- COMPARE SENIOR CLAIMS EXECUTIVES:
- Almost all Part 1 survey participants viewed their companies as having a "formal" structured settlement program either as an exclusive (one broker partner) or preferred (approved broker partner) program.
- Only 20 percent of the survey participants reported having any set of objectives around the use of structured settlements.
- S2KM COMMENT: This response appears to indicate a significant disconnect between a high percentage of the participating front line claims professionals and their senior claims executives (perhaps also with their broker "partners") related to their companys' structured settlement programs. It also suggests the need for appropriate structured settlement metrics and analytics as well as better education and program management. For additional S2KM commentary about structured settlement metrics and analytics in the context of NSSTA's Part 1 survey, see this prior blog post.
Does your company educate you about how structured settlements help to settle claims?
- RESPONSE: More than 40% receive no education. Only 54% would like more education.
- COMPARE SENIOR CLAIMS EXECUTIVES: 100 per cent of the survey participants said their companies could do more to proactively use structured settlements.
- S2KM COMMENT: An apparent conflict exists among front line claims professionals between the need for structured settlement education and the desire for more education. Depending upon alternative company priorities, including educational priorities, additional structured settlement education, linked with and to appropriate structured settlement metrics and analytics, represents the type of proactive commitment senior claims executives and structured settlement brokers should discuss to improve program performance.
Preferred areas for more education.
- MSAs - 71%
- Benefits of structures - 55%
- Settlement and negotiation strategies - 53%
- COMPARE SENIOR CLAIMS EXECUTIVES: 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.
- S2KM COMMENT: Front line claims professionals and senior claims executives agree on the importance of MSA education and a need for more information about the benefits of structured settlements. Although MSAs, at present, are primarily limited to workers compensation cases, MSAs (including liability MSAs) represent a strategic growth opportunity for structured settlements. The assumed "benefits" of structured settlements may not be obvious or adequately demonstrated. For examples, in the Part 1 survey, most senior claims executives disagreed with two traditional structured settlement value propositions (achieve earlier settlements; benefit to society). Professed structured settlement benefits should be confirmed with appropriate metrics and analytics.
How important do you believe it is to your Company that you use a structure in all “appropriate situations?”
- RESPONSE: Only 53% gave a score of greater than 5 (on a scale of 1 to 10).
- COMPARE SENIOR CLAIMS EXECUTIVES: Survey participants, on average, believed their companies utilized structured settlement consultants in only 66 percent of appropriate cases.
- S2KM COMMENT: This response identifies another apparent disconnect between front line claims professionals and senior claims executives (relative importance of structured settlements in appropriate cases) representing a potential priority for education, metrics and analytics to improve structured settlement program performance.
What is the biggest obstacle to using structures more frequently on your cases?
- Plaintiff objection - want cash
- Low interest rates/rate of return - responding to a separate, related question, 58% of the responding front line claims professionals said current interest rates affected their perception of the value of structured settlements.
- Low case value
- COMPARE SENIOR CLAIMS EXECUTIVES:
- Most of the claims executives surveyed believed structured settlement utilization has not decreased during the past three years but has decreased during the past 10 years - and that lower interest rates are the primary factor.
- Survey participants disagreed with the following structured settlement value propositions:equally effective on smaller and larger claims.
- S2KM COMMENT: During the NSSTA 2015 Annual Meeting, NSSTA president Michael Goodman identified "moving beyond 'interest rate selling'" as an industry priority which presumably NSSTA will incorporate into the educational component of its "Industry Growth Initiative". Responses from both front line claims professionals and senior claims executives suggest a need to rethink the historic push to broaden the application of structured settlements to lower value cases.
What is your average success rate, defined as the ratio of quotes you obtain vs. the number of claims you successfully settle with a structure?
- RESPONSE: 40%
- COMPARE SENIOR CLAIMS EXECUTIVES: A majority of the survey participants do not measure referral volume and only half measure the volume of successfully written structures.
- S2KM COMMENT: Based upon other survey responses, including the "obstacles to using structured settlements" identified in the previous question, and S2KM's experience, this response appears high and potentially self-serving. It could easily be confirmed or negated with appropriate metrics and analytics.
All other things being equal, would you prefer to settle your cases with cash, an annuity, or a combination of both?
- RESPONSE: Only 50% said cash.
- COMPARE SENIOR CLAIMS EXECUTIVES: Although in agreement, survey participants viewed two traditional structured settlement value propositions less strongly: 1) lower claims payouts; and 2) earlier claims resolution.
- S2KM COMMENT: The question seems confusing with the answer depending upon how the respondents interpret "all other things being equal". A better, multi-response question might be: assuming you do not save money or achieve earlier claims resolution using structured settlements, what types of cases, if any, would you attempt to structure and why?
Do you believe the involvement of a structured settlement consultant in a claim makes that claim more likely to settle?
- RESPONSE: 54% said it has no effect on settlement. In response to a separate question asking front line claims professionals to rate the helpfulness of attendance by consultants at settlement conferences and mediations, only 60% answered with scores greater than 5 (on a scale of 1 to 10).
- COMPARE SENIOR CLAIMS EXECUTIVES:
- 90 percent believed 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.
- S2KM COMMENT: These responses by front line claims professionals should be especially troubling to defense structured settlement brokers and appear to a indicate a significant disconnect between front line claims professionals and senior claims executives. Most structured settlement brokers believe their attendance at settlement conferences and mediations substantially improves the likelihood for sales success. Improving the response to this question, and closing the related disconnect with senior claims executives, represents an important strategic opportunity for defense brokers.
What are the primary values that a consultant brings to the table (separate from the annuity)?
- Effective communication
- Bridging the gap
- Knowledge, expertise, neutral file evaluation
- Trust and credibility
- COMPARE SENIOR CLAIMS EXECUTIVES:
- Survey participants viewed consultants' primary value proposition related to their knowledge of, and ability to sell, structured settlements.
- 90 per cent of the survey participants believed consultants do a good job of describing their value.
- S2KM COMMENT: This response appears to indicated a different type of disconnect. The primary values identified by front line claims professionals seem extremely important, individually and collectively, for achieving effective settlements. So what explains the relatively weak (or lack of) endorsement these same respondents provide above when asked: 1) Do you believe the involvement of a structured settlement consultant in a claim makes that claim more likely to settle? 2) How helpful is consultant attendance at settlement conferences and mediations? Because of the assumed significance of broker attendance for achieving a structured settlement sale, these related, but contradictory, findings require additional analysis - and may be the most important discovery of Parts 1 and 2 of the NSSTA surveys.
Rank the value of your consultants’ experience and knowledge on a scale of 1-10?
- 71% greater than 5. 25% gave a 10 (on a scale of 1 to 10).
- Responding to a separate question, 70% of the respondents rated their own loyalty to their structured settlement consultants as greater than 5 on a 1-10 scale. 25% rated their loyalty as 10.
- COMPARE SENIOR CLAIMS EXECUTIVES: Two thirds of the survey participants believed that consultants skills have stayed the same, while the other one third said the skills have improved, when compared to 10 years ago.
- S2KM COMMENT: Defense brokers should not be self-satisfied with these results. As indicated above, almost all Part 1 senior claims executive survey participants viewed their companies as having a "formal" structured settlement program either as an exclusive (one broker partner) or preferred (approved broker partner) program. Unlike plaintiff structured settlement brokers, defense brokers do not compete directly with financial planners and/or settlement trustees. In other words, most front line claims professionals have limited broker options and almost no performance comparisons.
What are the top 3 Areas for Consultant Improvement?
- Ease of quoting
- COMPARE SENIOR CLAIMS EXECUTIVES: Other recommendations: 1) expand Medicare services; 2) add online resources to price benefits; 3) obtain references from defense counsel.
- S2KM COMMENT: Among the responses from front line claims professionals "ease of quoting" stands out in part because it doubles down on the senior claims executives' recommendation to "add online resources to price benefits". The concerns here for defense structured settlement brokers should be: 1) whether, and to what extent, their product-specific structured settlement knowledge has become a commodity? 2) what new, unique "value added" knowledge, if any, will they provide to their clients, customers and other settlement planning professionals?