Structured Settlement Surveys

A prior S2KM blog post (J.G. Wentworth Structured Settlement Survey) introduces the J.G. Wentworth structured settlement survey and highlights other market reports and surveys important for "Growing the Structured Settlement Market".

These prior reports and surveys include:

• Market analysis by Towers Perrin titled "2007 Update on U.S. Tort Cost Trends"
• NSSTA 2006 Survey - as summarized by Joseph Costello at the NSSTA 2007 Winter Meeting and the NSSTA 2007 Annual Meeting;
• AIG 2007 Survey - as reported by AIG on the AIG website.

S2KM's summary of these three structured settlement marketing reports follows. The purpose of this S2KM summary is to provide context and perspective for S2KM's summary of J.G. Wentworth's more recent structured settlement survey. S2KM's review and analysis of the J.G. Wentworth survey will appear in subsequent S2KM blog posts.

Towers Perrin Study

• Reports $247 billion of 2006 U.S. tort costs.
• Does not address structured settlements or any other settlement planning products;
• Does not address the secondary structured settlement market;
• Consists of three components: 1) losses paid to third parties; 2) defense costs; and 3) administrative expenses.
• Calculates tort costs resulting from five insured plus uninsured business lines: 1) commercial multi-peril; 2) medical malpractice; 3) product liability; 4) other liability; and 5) commercial auto;
• Study excludes: 1) no-fault auto insurance; 2) property coverages; 3) workers compensation; 4) certain extraordinary (one time) costs - example: tobacco litigation.
• S2KM Note 1: a 2002 Towers Perrin study translated overall tort costs in 2001 into these additional cost categories and percentages: 1) administrative costs - 21%; 2) defense costs - 14%; 3) plaintiff attorneys -19%; 4) econcomic loss - 22%; and 5) non-economic loss - 24%.
• S2KM Note 2: Towers Perrin discontinued this portion of its analysis in 2002. It was "devilishly difficult" according to Russ Sutter, a Tillinghast principal and actuary who directs the Towers Perrin study, "primarily because we lack reliable information from plaintiff attorneys". The percentages represented Tillinghast's "best estimate" in 2002.
• S2KM assumption: for lack of more reliable estimates of tort cost payment categories and percentages, S2KM will use Tillinghast's "best estimate" in 2002 for 2001. The results for 2006 would be approximately: 1) $161 billion (65%) of 2006 U.S. tort costs represented payments to injury victims and their attorneys; and 2) $86 billion (35%) represented defense and administrative costs.

The NSSTA Survey

• Was never published online and never distributed to NSSTA members.
• S2KM is a NSSTA member. This S2KM summary is based upon S2KM's typewritten notes from the NSSTA 2007 Winter Meeting and the NSSTA 2007 Annual Meeting.
• The NSSTA-sponsored survey is titled: "A Study of the Structured Settlement Process Conducted on behalf of the National Structured Settlement Trade Association".
• The NSSTA survey was directed by Robert E. Hoyt, the Dudley L. Moore, Jr. Chair of Insurance at the Terry College of Business at the University of Georgia.
• The NSSTA survey consisted of attorneys involved in structured settlements (43 telephone surveys) and structured settlement recipients (1275 telephone and Internet surveys).
• As reported by Joseph Costello at NSSTA's 2007 Winter Meeting and 2007 Annual Meeting, 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.
• The NSSTA attorney survey results include the following responses to the question: "Whom do you prefer to use for purposes of financial planning for your clients?" The results: Trust company/department - 30%; Financial planner - 28%; Structured settlement consultant - 23%; No response - 19%.
• Additional attorney responses: 95% of the attorneys surveyed said they are proponents of structured settlements; 70% of the attorneys said they retain a structured settlement consultant at least for some cases; 93% of the attorneys are satisfied with their structured settlement consultant; 50% want to learn more about structured settlements; 75% said financial strength was the most important consideration in recommending annuity providers; 88% said they were aware they could structure their fees.
• Injury victim responses: 65% said they had not heard about structured settlements prior to settlement; most injury victim respondents were uncertain whether a structured settlement consultant was involved with their case; 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; 75% said they were very happy their settlement included structured settlement annuities; 75% of the injury victim respondents said they would recommend a structured settlement.
• The NSSTA survey did not include any questions about the secondary structured settlement annuity market.

The AIG Survey

• The AIG survey was sponsored by AIG American General Structured Settlements and conducted by Esearch.com, Inc. in September 2007.
• The AIG survey included 1000 U.S. participants - 80% had no connection with any personal injury case; 20% had previously been involved directly or indirectly through a family member in a personal injury case.
• Accuracy: AIG claims its survey has a margin of error of plus or minus 3.10 percent at a 95% level of confidence.
  
• AIG's conclusion: the structured settlement industry needs to educate Americans about structured settlements.
  
• AIG survey procedure: respondents who had no connection to a personal injury case were asked to read two hypothetical scenarios and answer questions on how they would react.Those with a direct connection to a personal injury case were not only asked to read the hypothetical scenarios, but also to answer questions based upon their real life experience.
• In AIG's first survey hypothetical, AIG provides no information about structured settlements. Results: 65% of respondents said they would elect a lump sum of which 49% said they believed they could make their own long term decisions and 26% said the lump sum was more appropriate to pay bills and pay off debt.
  
• In AIG's second survey hypothetical, AIG provided survey respondents with information about structured settlements - presumably this "AIG Backgrounder" which AIG features on its website. Results: 73% of respondents said they would elect a structured settlement.
  
• 206 of 1000 participants said they or their family had been involved with a personal injury case. Of the 206, 86% had elected lump sum; 57% said they were unaware of structured settlements; 64% said their attorneys did not inform them about structured settlements; 57% of those that elected a lump sum said their settlement funds were already depleted; 71% of respondents who said they favored a structured settlement did so "to provide a regimented stream of income designed to cover expenses".
• The AIG structured settlement survey did not include any questions or information about the secondary structured settlement market.