Beyond Structured Settlements

NSSTA 2016 Annual Conference

Len Blonder is a structured settlement pioneer now beginning an unprecedented third term as President of the National Structured Settlement Trade Association (NSSTA). It may seem counterintuitive, therefore, or perhaps wishful thinking, but one could describe NSSTA's 2016 Annual Conference, which occurred April 6-8 in Palm Beach Gardens, Florida April 6-8, as a "New Beginning."

Following the transformative leadership of Michael Goodman, NSSTA's immediate past President, however, the opportunity for such a new beginning now exists and the 2016 NSSTA Annual Conference Educational Program outlined some of the future possibilities.

TOPICS AND SPEAKERS

• Opening Remarks - Michael Goodman
• NSSTA Objectives - Len Blonder
• Settlement Experiences and Aftermath - Michael Goodman (Moderator); Tania Root; Todd Falzone, Esq.
• Wrongful Imprisonment: Claimant Story - Michael Goodman (Moderator); Kwame Ajamu
• Structuring Wrongful Imprisonment Claims - John McCulloch and Ryan Jandreau
• Trusts and Structured Settlements - Dan McCarthy (Moderator); Phillip Krause; Tim Denehy
• Mediators and Structured Settlements - Connie Klingler (Moderator); Hyram Montero; Len Blonder
• Projecting Future Economic Damages After the ACA - Roger Bernstein; Noah Katz; Nichole Segal
• Property & Casualty Insurance Program Growth - (Michael Goodman and Len Blonder - Moderators); David Crowe; Richard Woollams
• Legislative and Political Update - Eric Vaughn
• NSSTA Growth Initiative Update - Sean Coleman (Moderator); Jim Early; Melissa Evola Price; Ryan Jandreau
• SSPA Success Stories - Michael Goodman (Moderator); Andy Prindable; Sally Greenberg
• NSSTA Legal Update - Tim O'Driscoll; Peter Vodola; Steve Harris

S2KM COMMENTARY ON SELECTED TOPICS

NSSTA Growth Initiative

During Goodman's Presidency, NSSTA revised its historic and defensive "protect and preserve" strategy by embracing a new "Growth Initiative" which already appears to have generated new energy and improved "community" spirit. Progress reports for preliminary "Growth Initiative" priorities [re-starting P&C programs; convertible lump sums; and Federal Employee Compensation Act (FECA) amendment(s)] were all positive. Equally important, the overall theme was forward looking asking: "How can we move forward? How can we change the dialogue?"

Supporting its "Growth Initiative", NSSTA has also expanded its industry outreach and networking with other professional associations. Improved relationships among NSSTA, the Society of Settlement Planners (SSP) and the National Association of Settlement Purchasers (NASP) has helped unify the structured settlement market. Working together, NSSTA and NASP have added important consumer protection provisions to five state structured settlement protection statutes. As one result, Goodman declared in his Opening Remarks: "we can no longer use factoring as an excuse for not growing the industry."

Len Blonder Presidency

How will Blonder, a 38 year plus industry veteran who, as much as any single individual, has been personally responsible for "protecting and preserving" the tax foundation for structured settlements, respond to NSSTA's current leadership challenges and market opportunities?

"The times are changing and we must change", Blonder stated, as he addressed NSSTA's membership to begin his third term as President. "The business is more complicated. We must determine how the parts fit together. Despite plaintiff growth, defendants remain indispensable to structured settlements. Defendants must continue to play a key role."

Unless NSSTA faces an unexpected crisis, Blonder said his plans for NSSTA include continued industry and community growth. Based upon the preliminary success of the "Growth Initiative", Blonder announced it would become a permanent NSSTA committee and expand its current list of priorities. As a result of recent state legislative successes, Blonder stated he expects NSSTA to spend less time on factoring legislation and more time on judicial education during his term as president.

Among NSSTA's challenges and priorities, Blonder highlighted: growing NSSTA's membership and increasing membership diversity; continuing to improve relationships with outside associations; and improving public relations generally for both NSSTA and structured settlements.

Re-starting P&C Programs

Speaking as part of a panel discussing Property and Casualty Company Program Growth, Richard Woollams, President of Claims for AIG Commercial Insurance, provided a contrarian perspective concerning future structured settlement growth and industry change. Asked to predict what the structured settlement market will look like in five years, Woollams opined: "the same as today with more broker consolidation and better technology."

Woollams also identified reasons why some P&C companies have reduced their structured settlement program participation: "competing priorities; increasing compliance requirements; and inertia". Woollams further challenged NSSTA's membership by stating: "in workers compensation cases, the savings for defendants is obvious. Can you quantify the cost savings with liability cases? Even a couple of points pays for program compliance and administration."

Woollams' challenge concerning "cost savings for liability cases" echoes findings about "metrics and analytics" from a 2011 study (titled: "National Litigation Management Study") commissioned by the Claims and Litigation Management (CLM) Alliance (formerly "the Council on Litigation Management") as well as NSSTA's own 2014 survey of Senior Claim Advisors conducted by CLM Advisors.

Based upon interviews with leading litigation management executives, the 2011 CLM Alliance study identified structured settlement as the "most penetrated external initiative" among 30 litigation-related service areas analyzed. Another "key finding" that emerged from the answers to the more than 160 questions covered in that 2011 CLM Alliance study: "litigation executives are not happy with the metrics and analytics available to them."

Also relative to metrics and analytics, NSSTA's 2014 survey of senior claims executives found:

• Only 20 percent of the participants reported having any set of objectives around the use of structured settlements.
• A majority of the participants did not measure referral volume and only half measure the volume of successfully written structures.

Affordable Care Act

A separate NSSTA conference panel discussion about the Affordable Care Act (ACA) titled "Projecting Future Economic Damages After the ACA and Collateral Source Rule Changes" highlighted one way NSSTA members can utilize structured settlements to quantify potential cost savings for defendants. That being part of an expert team that provides defendants with two-tier (with and without ACA coverage) case specific calculations of future economic damages.

As NSSTA's ACA panel pointed out, the admissibility of ACA coverage for trial purposes (both for evidence and damage calculation) depends upon the common law collateral source rule which not only varies by state, but also is subject to current, state-specific post-ACA legal disputes as to applicability. This contested claims environment, plus the applicable expert damage team recommended by the NSSTA panel (featuring a structured settlement broker), represents both a strategic growth opportunity for NSSTA members as well as a priority for continued in-depth education.

Trusts and Structured Settlements

The NSSTA conference panel discussing "Trusts and Structured Settlements" provided another window for viewing potential structured settlement change and growth. Contrary of traditional structured settlement perspectives, which view trusts as competitive products in a zero sum settlement game, panelist Tim Denehy (who identified himself as a "settlement planner" offering trusts and structured settlement annuities) insisted: "A structured settlement does not solve every problem. However, by offering additional products, I can sell more structures."

Fellow trust panelist Phillip Krause, who also sells multiple settlement products, stated: "I analyze products as an investment fiduciary." He added, however: "There is more potential liability with a multi-product model." As an alternative to a multi-product model, Krause suggested structured settlement brokers might partner with, or delegate product sales to, a trust provider. Moderator Dan McCarthy supported a more traditional approach saying he continues to defer to plaintiff attorneys' relationships with banks and trust companies.

NSSTA has been slow to explore and/or embrace the evolving settlement planning profession in which structured settlement annuities, as well as trusts, represent strategic, interactive products. Other professional associations, especially SSP and the Academy of Special Needs Planners (ASNP), have been more proactive than NSSTA in analyzing settlement planning issues. As more plaintiff brokers offer trusts and other non-structured settlement products, and share commissions with defense brokers, NSSTA should consider helping its members better understand how settlement planning impacts the sale of structured settlements - creating new opportunities as well as risks.

Structuring Wrongful Imprisonment Claims

John McCulloch and Ryan Jandreau traced the history and explained the significance of IRC 139F which was enacted December 21, 2015 as part of the Protecting Americans from Tax Hikes Act of 2015 (PATH Act). "In the case of any wrongfully incarcerated individual," IRC section 139F provides: "gross income shall not include any civil damages, restitution, or other monetary award (including compensatory or statutory damages and restitution imposed in a criminal matter) relating to the incarceration of such individual for the covered offense for which the individual was convicted." Damages paid for wrongful imprisonment, however, which are not derived from a personal, physical injury, are not eligible for an IRC section 130 qualified assignment. Although the exact number of exonerees is not known, McCulloch and Jandreau cited sources estimating approximately 4000 nationally over the past 15 years.

NSSTA DIRECTORS AND AWARD WINNERS - NSSTA announced the election of two Directors: Mal Deener and Ryan Jandreau. In addition, the following individuals were honored during the conference:

• President's Award - Debbie Sink
• Leadership Award - Susan Clark and Robert Caples
• Service to the Industry Award - Andrew McClain

CONCLUSION

Assuming NSSTA's 2016 Annual Conference represents a "New Beginning" for the structured settlement industry, the upcoming year will be one of the most important, if not the most important, in NSSTA's history. Based upon his leadership experience and prior accomplishments, Len Blonder appears uniquely qualified to help NSSTA determine how the parts of an increasingly complicated business fit together in order to continue to grow structured settlement annuity sales and improve the lives of personal injury victims.

CORRECTIONS AND  OMISSIONS

S2KM began receiving valuable feedback to this blog post almost immediately following its publication. Examples:

The second paragraph under "Trusts and Structured Settlements" above has been changed from what originally appeared in this blog post, at the request of Phillip Krause, to clarify that he used the word "investment" and not the word "professional." Krause explained: "An 'investment fiduciary' is a specific role within the management of a Trust. The Trustee delegates or directs investment decisions to the 'investment fiduciary.' The role of 'investment fiduciary,' is separate from the role of a 'structured settlement consultant.' An investment fiduciary uses registered investments with the SEC/FINRA.  A broker dealer may also be involved in the approval of the appropriateness of investments held within the Trust.  The oversight by an OSJ or compliance officer is also common."

S2KM could (still might) write an entire blog post about the informative "Property & Casualty Insurance Program Growth" discussion moderated by Michael Goodman and Len Blonder and featuring Richard Woollams and David Crowe. Some of Woollams' comments appear in the original blog post. Crowe also offered valuable insights and recommendations for re-starting P&C structured settlement programs including the importance of: 1) identifyinging one or more internal structured settlement "champions"; 2) showing the impact on a P&C's bottom line; 3) defense and plaintiff brokers working together for a more efficient settlement process; 4) attracting bright young professionals to the structured settlement industry - a problem, he stated, is shared more generally by the insurance industry.

NSSTA Marketing Surveys - Plaintiff Attorneys

The National Structured Settlement Trade Association (NSSTA) has previously announced an "Industry Growth Initiative" - "designed to identify opportunities to expand the use of structured settlements and bring those opportunities to the structured settlement marketplace" - which appears to focus multiple growth-oriented goals NSSTA president Michael Goodman identified during NSSTA's 2015 Annual Meeting.

Although the first progress report for its Growth Initiative will not occur until NSSTA's 2015 Fall Educational Meeting, expanded use by traditional stakeholders represents one logical 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 has previously reviewed Part 1 and Part 2 of NSSTA's structured settlement survey - the results of which NSSTA has made available to its members, including S2KM. NSSTA and CLM Advisor representatives have also provided their own interpretive analyses of these surveys during prior NSSTA educational conferences.

This blog post discusses selected portions of Part 3 (Titled: "Plaintiff Attorney Survey of Structured Settlements") the results of which: 1) NSSTA has made available to its members, including S2KM; 2) neither NSSTA nor CLM Advisors has yet to discuss or analyze during a NSSTA educational conference. 130 attorneys participated in the Part 3 survey. Not every attorney responded to every question.

S2KM INTRODUCTION

Until the Weil lawsuit settled in 1996, defendants retained exclusive control of structured settlements. Many defense brokers, as well as their liability insurance company clients, historically have referred to unsuccessful sales as "cash outs". As a general rule, their professional interests in structured settlements have been narrowly defined and focused upon their own product to the exclusion of other settlement related financial and insurance products.

To a much greater extent than defense brokers, plaintiff structured settlement brokers (and settlement planners, their evolutionary progeny) face direct competition from other product and service providers who market to plaintiff attorneys. These settlement planning product and service providers include: tax attorneys, special needs attorneys, settlement trustees, financial planners, life care planners, case managers, economists, Medicare set-aside (MSA) specialists and damage allocators - as well as structured settlement consultants. In response, many plaintiff structured settlement brokers and settlement planners increasingly offer financial and insurance products and services which extend beyond structured settlements.

Regardless of case complexity, or the involvement of other settlement planning professionals, plaintiff attorneys continue to perform the following essential settlement planning roles:

• Recognizing settlement planning issues which impact their clients;
• Recommending appropriate settlement planning professional resources to their clients; and
• Retaining ultimate responsibility for effectuating settlements.

For these reasons, plaintiff attorneys represent the primary marketing target for companies and professionals offering settlement planning services - as well as a logical priority marketing target for growing the structured settlement market.

To effectively analyze the growth opportunities and obstacles for structured settlements and structured settlement brokers from the plaintiff attorney's perspective, therefore, both need to be viewed (and surveyed) in a broader context - as subsets of, and participants in, the larger and more complex personal injury settlement planning market. Although the results of NSSTA's Part 3 Survey provide valuable marketing information, the survey questions neither attempt nor accomplish this more comprehensive objective.

This shortcoming is understandable - even predictable. CLM Advisors, which conducted all three of the NSSTA surveys, is an affiliate of Claims and Litigation Management (CLM) Alliance - "the only national organization created to meet the needs of professionals in the claims and litigation management industries". Perhaps as a result, NSSTA's Part 3 Survey has a defense-oriented, historic quality. Some of their survey questions use awkward or unfamiliar language ("ancillary products to structures"). Some important issues (fiduciary responsibilities) are only addressed obliquely. Other important topics (Non-Qualified Assignments; Qualified Settlement Funds; Affordable Care Act) are not addressed at all.

Borrowing a phrase from an excellent presentation titled "Marketing Attorney Fees", delivered by Spooner Phillips and Rebecca Metzger at NSSTA's inaugural Structures 202 Conference, and applying it more broadly, perhaps it's time for proponents of structured settlements to "change the conversation" when marketing to plaintiff attorneys.

NSSTA SURVEY PART 3 SELECTED RESPONSES WITH S2KM COMMENTS

• 40% of respondents stated low interest rates have not negatively affected their perception of structured settlements.
• 67% said factoring has no impact on their willingness to consider a structured settlement or that they are indifferent to the factoring industry.

S2KM Comment: These findings should encourage NSSTA members to re-think standard explanations for recent lackluster industry sales results. They also support two of the seven goals Michael Goodman has identified for NSSTA during his term as president.

• 89% believe they "have adequate knowledge of structured settlements so that [they are] able to recognize when they would be in the best interest of an injured party..."
• Only 28% said they suggest a structured settlement for cases involving Medicare set-asides (MSAs).

S2KM Comment: Similar to NSSTA surveys Parts 1 and 2, Part 3 identifies a need and opportunity to educate all structured settlement stakeholders to the advantages of funding MSAs with structured settlements including their inherent cost advantage compared with lump sums resulting from current CMS regulations for calculating present values.

• Less than 25% are likely to have a client sign a letter acknowledging that they were exposed to the opportunity to structure a portion of their settlement before opting for an all cash settlement.

S2KM Comment: Every plaintiff structured settlement broker and settlement planner who sells structured settlements should be familiar with the Grillo case and use it help educate plaintiff attorneys about their potential liability for not advising their clients about structured settlements.

• 40% said they felt obligated to introduce the idea of a structured settlement to a client if a case has a value between $101,000 and $500,000.
• An additional 32% felt obligated for cases having a value in excess of $500,000.

S2KM Comment: Although there is nothing inherently wrong with utilizing case values to identify potential structured settlement cases, this approach represents a more traditional, defense-oriented methodology rather than a plaintiff-oriented, comprehensive planning methodology that attempts to match products to needs.

• 48% stated the most significant drawback of a structured settlement is lack of liquidity.

S2KM Comment: NSSTA and its members should carefully consider how to improve primary market sales by proactively addressing this finding based upon the following, previously highlighted finding: 67% said factoring has no impact on their willingness to consider a structured settlement or that they are indifferent to the factoring industry.

• Only 4% view structured settlement consultants as adding value for negotiations and/or case evaluations separate from, or in addition to, their knowledge of structured settlements.
• 35% stated that structured settlement consultants fail to deliver value because they are concerned with structuring as much of a settlement as possible.
• 52% contact a structured settlement broker one week (possibly less) prior to a mediation.
• 38% make contact only after a case settles.
• 40% said they would use the defendant's structured settlement consultant.
• Only 20% assume a defendant will be offering more money if a defense structured settlement consultant is present.
• 38% work with financial planners instead of structured settlement consultants - at least on some cases.

S2KM Comment: This feedback provide an excellent starting point for NSSTA and its members to think strategically about how to increase structured settlements sales within the larger, more complex personal injury settlement planning market.

• Only 26% have ever structured their fees.

S2KM Comment: Similar to MSAs, structured attorney fees appear to represent an underdeveloped opportunity to grow the structured settlement market. Among the significant takeaways from the Structures 202 "Marketing Attorneys Fees" presentation referenced above: 1) the presenters were a settlement planner, who sells multiple products including structured settlement annuities, and a tax attorney; 2) their recommended sale encompasses tax, business, retirement and estate planning.

CONCLUSION

Although somewhat circumscribed by a traditional, defense perspective, NSSTA's Part 3 Survey of plaintiff attorneys provides valuable information for re-positioning the structured settlement industry for additional growth within the personal injury settlement market. The findings support and supplement the goals for growth previously identified by NSSTA president Michael Goodman and should assist NSSTA's Growth Initiative Committee in formulating its strategic priorities.

NSSTA Marketing Surveys - Senior Claims Executives 2

The National Structured Settlement Trade Association (NSSTA) has established a new NSSTA "Industry Growth Initiative,"  "designed to identify opportunities to expand the use of structured settlements and bring those opportunities to the structured settlement industry marketplace."

A recent three-part survey commissioned by NSSTA, and conducted by CLM Advisors, of NSSTA members' traditional sales targets (senior claims executives; claims professionals; plaintiff attorneys) offers valuable insights for NSSTA's Growth Initiative and therefore is the subject of an S2KM blog series. S2KM summarized NSSTA's survey of senior claims executives in this prior blog post.

When interpreting some of the key findings from NSSTA's survey of senior claims executives, it is useful to compare the findings from a separate 2011 study (titled: "National Litigation Management Study") commissioned by the Claims and Litigation Management (CLM) Alliance (formerly "the Council on Litigation Management"). CLM Alliance is the parent company of CLM Advisors, the company that conducted the three-part survey project for NSSTA.

Two findings from the 2011 CLM Alliance study are significant for structured settlements and for interpreting key findings from NSSTA's 2014 survey of senior claims executives.

• Based upon interviews with leading litigation management executives, the 2011 CLM Alliance study identified structured settlement as the "most penetrated external initiative" among 30 litigation-related service areas analyzed.

• Another "key finding" that emerged from the answers to the more than 160 questions covered in that 2011 CLM Alliance study: "litigation executives are not happy with the metrics and analytics available to them." Note: this finding was not limited to structured settlements.
  

An article in the Fall 2011 issue of CLM's "Litigation Management Magazine", discussing the 2011 CLM Alliance study, further describes a "shift in thinking" among litigation executives about metrics and analytics applicable to national service provider programs such as structured settlements:

"These programs are about much more than cost savings, although the savings can be substantial and can be in and of themselves a primary motivation to create these programs. To be truly successful, national service programs must be able to deliver the very metrics and analytics that participants said they are seeking: quality, performance, satisfaction levels. These are the metrics that a national service provider must be able to give to its clients in today's environment."

NSSTA's 2014 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, however, said their companies could do more to proactively use structured settlements:

Relative to metrics and analytics, NSSTA's survey found:

• Only 20 percent of the participants reported having any set of objectives around the use of structured settlements.
• A majority of the participants did not measure referral volume and only half measure the volume of successfully written structures.

Collaborating with individual property and casualty insurance companies (or associations such as the CLM Alliance) to identify, develop, improve, implement and measure structured settlement metrics and analytics, therefore, should represent one important marketing priority and program foundation for improving structured settlement sales.

Neither the CLM Alliance 2011 study nor NSSTA's 2014 survey recommend specific metrics or analytics to determine the effectiveness of, or to define "success" for, structured settlement programs.

Using the NSSTA 2014 survey and the CLM 2011 study as points of reference, here are some questions structured settlement brokers might discuss with senior claims executives to develop such metrics and analytics:

• How do you define whether your structured settlement program is successful?
• What performance metrics help you evaluate the effectiveness of your structured settlement program?
• How effective are your metrics and analytics in measuring success?
• Which metric is most important?
• Which metric is most difficult to obtain or confirm?
• Do structured settlements increase or decrease your claims costs?
• How do you measure the impact of structured structured settlements on your claims costs?
• What is your structured settlement success ratio?
• What changes in your program would improve your structured settlement performance?

To transform these suggested introductory questions into a successful marketing and sales strategy, structured settlement brokers must be capable of effectively discussing structured settlement metrics and analytics. NSSTA could assist its members in doing so by offering educational programs designed to improve its members' abilities to identify, develop, implement and measure structured settlement metrics and analytics.

In a final blog post analyzing NSSTA's survey of senior claims executives, S2KM will consider the significance of additional survey findings on future defense-driven structured settlement market growth.