Three prior S2KM blog posts:
- Introduced the J.G. Wentworth (JGW) 2008 structured settlement survey;
- Summarized other related and recent structured settlement reports and surveys; and
- Identified the nine (9) JGW survey questions JGW has given S2KM permission to publish.
This S2KM blog post summarizes responses to five JGW survey questions directly related to the primary structured settlement market. A subsequent S2KM blog post will summarize responses to four JGW survey questions about the secondary structured settlement market.
According to Ken Murray, JGW's chief marketing officer, the JGW structured settlement survey resulted from recommendations made during the 2008 Structured Settlement Thought Leadership Conference. The JGW survey included 115 structured settlement recipients who have sold some or all of their structured settlement payment rights to JGW. Not all survey participants responded to all questions.
JGW Primary Market Survey Questions
- Question 1: How many years ago did you settle your original lawsuit?
- Question 2: When you settled your original lawsuit, why did you accept payments over time rather than a single lump sum of cash?
- Question 3: How satisfied are you that you accepted a structured settlement?
- Question 4: Do you wish you and your attorney had negotiated for a single lump sum settlement?
- Question 5: When you settled your original lawsuit, how well informed were you about structured settlements?
Question 1: How many years ago did you settle your original lawsuit?
Responses:
- More than 10 years ago - 70.9%
- 5 to 10 years ago - 14.5%
- 1 to 5 years ago - 13.6%
- Past 12 months - 0.9%
S2KM comments:
- Based upon industry estimates, "Structured Settlements and Periodic Payment Judgments" (S2P2J) reports approximately $107 billion of structured settlement annuity premium from 1976 to 2007.
- Of this $107 billion, $54.3 billion (approximately 51%) was produced during the past 10 years (1998 to 2007) and $52.4 billion (approximately 49%) was produced during the prior 22 years (1976 to 1997).
- Industry sources report that $4.4 billion of structured settlement annuity premium has been produced during the first nine months of 2008 for an estimated $111 of historical structured settlement annuity premium.
- Transfers of structured settlement payment rights began in the late 1980s. IRC section 5891 was enacted in 2002. 46 states have enacted structured settlement protection statutes.
- Various sources have provided S2KM with estimates of historical structured settlement transfers ranging between 2% ($2.2 billion) and 6% ($6.6 billion) of historical structured settlement premium ($111 billion) as measured by payments made by transfer (factoring) companies to original structured settlement recipients.
- The responses to this JGW survey question conflict with one study by one structured settlement annuity provider released privately in 2008. This annuity provider reported at the National Settlement Consultants (NSC) 2008 Annual Meeting that most transfers of its structured settlement annuities occur during the first 10 years following origination.
Question 2: When you settled your original lawsuit, why did you accept payments over time rather than a single lump sum of cash?
Responses:
- Due to status as a minor, structured settlement considered best option - 38.3%
- Lump sum was not offered - 23.4%
- Payments over time seemed like a better deal - 23.4%
- Not sure I could manage a large amount of cash - 7.4%
- To pay future medical expenses or special needs - 6.4%
- Faster way to settle - 1.1%
S2KM comments:
- In response to this question, 61.7% of the structured settlement recipients in JGW's survey said they never were given a lump sum option.
- 38.3% of those structured settlement recipients were minors whose settlements presumably were approved and/or selected by judges and guardians. An additional 23.4% of the structured settlement survey respondents (presumably not minors) stated they were not offered a lump sum alternative to a structured settlement.
- Only 38.3% of the JGW survey respondents (23.4% + 7.4% + 6.4% + 1.1%) identified a positive reason for accepting a structured settlement.
- Compare these JGW results with the results of a structured settlement survey sponsored by NSSTA in 2006.
- As reported by Joseph Costello at NSSTA's 2007 Winter Meeting and 2007 Annual Meeting, 95% of the attorneys NSSTA surveyed in 2006 said they are proponents of structured settlements.
- And yet, as also reported by Costello, NSSTA's study found that only 7% of personal injury settlements between $75,000 and $100,000 include structured settlements; and only 30% of personal injury settlements above $1 million include structured settlements.
- Based upon a 2002 Towers Perrin "best estimate" of U.S. tort cost categories and percentages applied to the results of Towers Perrin's study of 2006 U.S. tort costs, $161 billion (65%) of 2006 U.S. tort costs represented payments to injury victims and their attorneys.
Question 3: How satisfied are you that you accepted a structured settlement?
Responses:
- As a minor, a structured settlement was considered the best option - 25.0%
- Mostly satisfied - 24.1%
- Neither satisfied nor dissatisfied - 21.3%
- Completely satisfied - 18.5%
- Slightly dissatisfied - 6.5%
- Completely dissatisfied - 4.6%
S2KM comments:
- 42.6% of JGW's survey respondents said they were "completely satisfied" (18.5%) or "mostly satisfied" (24.1%) that they accepted a structured settlement.
- 46.3% either stated they were not satisfied or dissatisfied (21.3%) or they were minors (25%) for whom courts and guardians selected a structured settlement.
- 11.1% stated they were either slightly dissatisfied (6.5%) or completely dissatisfied (4.6%) with their structured settlement.
- Note: 100% of the JGW survey respondents have sold some or all of their structured settlement payment rights to JGW.
- By comparison, the NSSTA survey found 75% of its survey respondents who received structured settlements said they were very happy their settlement included structured settlement annuities. The same percentage (75%) said they would recommend a structured settlement.
Question 4: Do you wish you and your attorney had negotiated for a single lump sum settlement?
Responses:
- No - 31.5%
- As a minor, I was unable to negotiate my settlement terms - 27.8%
- Maybe - 20.4%
- Yes - 10.2%
- I don't know - 10.2%
S2KM comments:
- 31.5% of the JGW survey respondents (all of whom have previously sold payment rights to JGW) expressed no second or negative thoughts about their decision to negotiate a structured settlment instead of a lump sum settlement.
- 27.8% of the respondents, as minors, were unable to negotiate their own settlement terms - but subsequently decided to sell some or all of their payment rights to JGW.
- 40.8% of the respondents express regrets or uncertainty about structured settlements without any positive endorsement of structured settlements.
- Among the important structured settlement issues the JGW survey highlights are structured settlements for minors. More than 25% of the JGW survey respondents are minors who did not personally negotiate their own settlements.
Question 5: When you settled your original lawsuit, how well informed were you about structured settlements?
Responses:
- Due to my status as a minor, I was not informed - 30.5%
- Very well informed - 27.6%
- Not well informed - 24.8%
- Well informed but still had questions post-settlement - 17.1%
S2KM comments:
- Only 27.6% of the respondents to JGW's survey believe they were "very well informed" about structured settlements when they settled their lawsuits.
- 30.5% said they were minors when their case was settled meaning they did not personally approve their own settlement. Questions: what information about structured settlements does the industry provide to minor recipients of structured settlements when they attain their age of majority? Should every minor structured settlement recipient be allowed to sell his or her payment rights when they reach the age of majority? Why not?
- 41.9% reported an inadequate education about structured settlements.
- Compare the JGW survey results with these results from the NSSTA survey: 65% of injury victim respondents to the NSSTA survey said they had not heard about structured settlements prior to settlement; most injury victim respondents to the NSSTA survey were uncertain whether a structured settlement consultant was involved with their case; only 34% recalled receiving educational information; 75% of this 34% who recalled receiving structured settlement educational information said the information was helpful; 66% of the injury victim respondents first learned about structured settlements from their trial attorney; 95% of the attorneys NSSTA surveyed said they are proponents of structured settlements.
In a subsequent S2KM blog post, S2KM will summarize responses to four JGW survey questions about structured settlement transfer decisions.
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