Beyond Structured Settlements

NAMSAP 2016 Annual Conference

The National Alliance of Medicare Set-Aside Professionals (NAMSAP), "the only non-profit association exclusively addressing the issues and challenges of the Medicare Secondary Payer (MSP) Statute and its impact on workers’ compensation and liability settlements", hosted its 2016 Annual Conference September 14-16 in San Antonio, Texas.

NAMSAP, which also seeks and welcomes opportunities to help improve Medicare set-aside (MSA) industry standards for documentation, work product and business practices, encompasses a highly diverse professional membership consisting of attorneys, MSA allocators, MSP compliance consultants, CPAs, claims professionals, structured settlement consultants, guardians, nurses, pharmacists, rehabilitation professionals, and life care planners.

As S2KM has observed in reports about past NAMSAP conferences (see links below), the combination of membership diversity, subject matter complexity, legislative and regulatory developments plus an expanding MSA market create extraordinary challenges for NAMSAP in planning and organizing its educational programs. This year's conference, co-chaired by NAMSAP President Gary Paturneau and Michelle Allan, should be congratulated for setting new standards for attendance (180) and sponsor/exhibitors (15) as well as the quality and organization of the speakers and extensive handout materials. The conference educational program was divided into two parts: an "MSP Crash Course" and the General Conference.

NAMSAP 2016 CONFERENCE

TOPICS AND SPEAKERS

MSP "CRASH COURSE"

• MEDICARE SECONDARY PAYER ACT 101 - Dan Anders and Leslie Schumacher
• GENERAL ANATOMY OF THE WCMSA REFERENCE GUIDE - Jake Reason and Kathleen Wyeth
• WHAT WOULD CMS DO? - Barbara Fairchild and Erin O'Neill

GENERAL CONFERENCE

• CONFERENCE INTRODUCTION - Gary Paturneau and Michelle Allan (Co-Chairs)
• MEDICARE ADVANTAGE ORGANIZATION CASE LAW - Ciara Koba; Heather Sanderson Hon Lee Yeakel; Jennifer Jordan
• CIVIL MONETARY PENALTIES - Katie Fox; Monika Boswein
• CURRENT STATE OF CONDITIONAL PAYMENT RECOVERY - Michele Carey; Shawn Deane; William Delaney
• PRIMARY PAYER APPEALS - Deborah Robinson Stewart; Melissa Woitalewicz; Kim Young
• ADVENTURES IN ALLOCATING - Christine Melancon; Beth Hostetler; Jake Reason
• SUBMISSION VS. NON-SUBMISSION (OPT-OUT) FOR WC - John Cattie; Jennifer Jordan; MeLinda Petit; Robert Sagrillo; Mark Sidney; Rita Wilson; Mark Walls (Moderator)
• LIABILITY MSAS - David Cherry; Roy Franco; Thomas Spratt
• SETTLEMENT LANGUAGE - Joy Brewer; James Raines; Vincent Quatrini
• CONFLICTS WITH STATE LAW - Jeanmarie Calcagno (IL), Rodney McColloch (GA), Joseph Schneider (TX)
• WCMSA RE-REVIEW PROCESS - Carmen Folluo; Shannon Metcalf; Kimberly Wiswell
• MITIGATING COSTS WHILE PROVIDING QUALITY CARE - Amy Bilton; Amy Lee; Mark Pew; Pamela Schweitzer.
• WHAT IS AFFECTING STAKEHOLDERS - John Cattie; Doug Holmes; Greg McKenna; Gary Paturneau

NOTEWORTHY NAMSAP PRESENTATIONS

Among NAMSAP's many outstanding conference presentations, S2KM found the following most noteworthy from a structured settlement perspective:

• The "Crash Course" presentation "Medicare Secondary Payer Act 101", which also featured an informative Medicare Overview and included exceptional handouts, did not reference structured settlements. With that single proviso, however, this NAMSAP presentation successfully captured, organized and communicated applicable information and data better than any prior presentation S2KM has attended - and should become part of the core curriculum for future educational programs offered by the National Structured Settlement Trade Association (NSSTA) and the Society of Settlement Planners (SSP).
• Another NAMSAP "Crash Course" presentation which arguably should have, but did not, discuss structured settlements, was titled: "General Anatomy of the WCMSA Reference Guide". Specific references to "structured settlements" exist throughout the WCMSA Reference Guide - see, for example: Table of Contents 5.0; 5.2; 19.3; Appendix 3 (Glossary entry for "structured settlement"); and Appendix 5:15. Paradoxically, and more importantly, the subtitle for this NAMSAP's Crash Course presentation (the "Final resting place for the old CMS memos"), is critically important for understanding why structured settlements provide an inherent cost advantage, compared with cash, in funding WCMSAs - as S2KM first explained in this 2013 blog post and which appears to remain just as applicable and important in the context of CMS WCMSA Reference Guide Version 2.5.
• Only one NAMSAP 2016 conference presentation ("Settlement Language") substantively addressed structured settlements issues. Significantly, based upon S2KM's review, the structured settlement documentation included with the NAMSAP conference handouts for this presentation raised potential tax issues and highlighted a fundamental problem. The CMS WCMSA Reference Guide Glossary defines "structured settlement" as "[a] settlement in which the agreed-on funds are paid from an initial deposit and subsequent deposits on a regular basis for a given amount of time." Unfortunately, there is no specific link in the CMS WCMSA Reference Guide to either structured settlement tax law generally or the tax definition for “structured settlement” in IRC 5891(c)(1) or the tax requirements of IRC 130 and 104(a)(1) more specifically. Settlement documentation which may satisfies CMS, therefore, does not automatically satisfy the IRS.
• The concluding NAMSAP panel discussing "What is Affecting Stakeholders" provided a valuable, if overly brief, summary of the complex Federal and state legislative and regulatory developments re-shaping personal injury claim management and settlement planning. Although many of the Medicare-related developments were addressed individually by separate NAMSAP presenters, the "Big Picture" perspective helped to reinforce how dramatically and quickly systemic changes are redefining the marketplace. For the structured settlement industry to expand and retain a leadership position within these dynamic claim management and settlement planning markets, it follows (at least from S2KM's perspective) that industry leaders must improve their collective knowledge of the changing landscape (much of it related to government benefits) in order to help industry participants learn to re-position their sale from a stand alone alternative product to a critical component of integrated claim and settlement solutions.

ADDITIONAL S2KM OBSERVATIONS

During the NAMSAP 2014 Regional Conference, then NAMSAP President Michael Westcott explained why structured settlements and MSAs produce "a perfect match that also saves stakeholders on the cost of compliance":

• "A structured settlement is a contract that defines specific future periodic payments for a specific dollar amount for a specified time."
• "An MSA is an agreement with CMS to pay agreed upon future costs for an agreed dollar amount for an agreed period of time."

"Good settlement planning", Westcott added, "requires that all professional advisers know the roadmap to compliance." Unfortunately, he concluded, structured settlements continue to be underutilized amid too much discussion on process and too little on benefits.

Just as Westcott pointed out in 2014, structured settlements continue to be underutilized in 2016 - especially considering the inherent cost advantage CMS has provided for structured settlement funding of WCMSAs compared with cash. Among the reasons (from S2KM perspective): a strategic knowledge gap separates most of the structured settlement industry from the MSP community creating, especially for structured settlements, educational needs but also business opportunities. Some examples and thoughts:

• Among a diverse, intelligent and influential group of NAMSAP speakers, 15 exhibitors and 180 attendees, only six structured settlement brokers attended this year's NAMSAP conference; none of whom were featured speakers; and only one broker company exhibited. No structured settlement annuity provider representatives attended or exhibited.
• NSSTA's current Certified Structured Settlement Consultant (CSSC) certification program does not cover MSAs, or the MSP Act or government benefits more generally. This educational omission probably results, at least in part, from NSSTA's historic political and marketing slogan that: "structured settlements enable injury victims to live free of reliance on government assistance".
• Regardless of its historic accuracy and/or value, this political/marketing slogan now appears not only false but contradictory and counterproductive. For many of the most promising and strategic structured settlement submarkets (including not just MSAs, but also special needs trusts, the Affordable Care Act, and the ABLE Act) the challenges and growth opportunities require integrating structured settlements with government benefits.
• In 2014 NSSTA commissioned separate surveys of senior claims executives, claims professionals and plaintiff attorneys. Significant for Medicare and MSAs, two thirds of the senior claims executive survey participants said they believed that structured settlement broker/consultant skills had stayed the same compared to 10 years ago and that they would value more educational and informational services about MSA requirements. They also recommended that structured settlement broker/consultants expand their Medicare services. Claims professionals, when asked their preferred areas for more education, gave their highest response by far (71%) to MSAs.
• Providing a "carrier perspective" on MSA compliance during their 2014 NAMSAP Regional Conference presentation, claims executives William Paxman and Todd Reimer pointed out that, although MSA issues are increasingly complex, they tend to align plaintiff attorneys and defendants - a decidedly positive characteristic for the structured settlement industry which has struggled historically with plaintiff vs. defendant broker "issues".

The structured settlement and Medicare Secondary Payer communities of professional practice increasingly overlap and share complementary knowledge and clients. A more formal working relationship that encompasses their respective professional associations and addresses shared educational, marketing, legislative, and regulatory considerations would likely improve and further expand both communities.

MSP ACT AND MSA BACKGROUND

MSAs are administrative and funding mechanisms utilized in certain categories of settlements to protect Medicare's interests as "secondary payer" under the MSP statute. Enacted in 1980, the MSP Act requires certain insurers, including liability, automobile, no-fault and workers compensation insurers, to make payment first for services to Medicare beneficiaries regarding claimed injuries, with Medicare responsible only as a “secondary payer.”

The Centers for Medicare & Medicaid Services (CMS), the Federal agency responsible for administering Medicare policies, failed to take practical steps to enforce the MSP rules until 2001 when it issued the first of several policy memoranda addressing workers compensation (WC) MSAs. These policy memoranda created a format, checklists and procedures for seeking approval for WCMSAs to "protect Medicare's interests" when workers compensation cases are settled.

Several of these WCMSA policy memoranda address, directly or indirectly, structured settlement issues. One of these policy memoranda (dated October 15, 2004) addresses WCMSA present value calculations and provides an important pricing advantage for annuity funding compared with lump sum funding.

During 2013, CMS published both an 88 page WCMSA Reference Guide - since updated to Version 2.5. The Reference Guide's intended purpose is to help WCMSA professionals, beneficiaries and other stakeholders "understand CMS' [WCMSA] amount approval process and to serve as a reference for those electing to submit such proposals to CMS for approval." CMS has also published a WCMSA Self-Administration Toolkit to help self-administrators manage their WCMSA accounts appropriately. Both the Reference Guide and the Toolkit prominently feature structured settlements.

Although CMS and its field offices have also issued informal guidance about the use of MSAs in liability cases, nothing comparable exists to the CMS WCMSA memoranda, WCMSA Reference Guide or the WCMSA Self-Administration Toolkit. As a result, there currently is no consensus among tort practitioners as to whether and when MSAs are required in liability cases. Lack of CMS guidance has not prevented an increase in the number of liability MSAs, according to leading professional MSA administrators. Unlike WCMSAs, however, liability MSAs typically are not submitted to CMS for approval.

S2KM Reporting for Prior NAMSAP Conferences

• 2005 NAMSAP Annual Meeting
• 2008 NAMSAP Annual Meeting
• 2010 NAMSAP Annual Meeting
• 2014 NAMSAP Regional Meeting
  • Part 1
  • Part 2
• 2014 NAMSAP Annual Meeting
• 2015 NAMSAP Winter Regional Conference
• 2015 NAMSAP Annual Conference

SSP/ASNP 2016 Annual Conferences

Joint overlapping educational conferences hosted by the Society of Settlement Planners (SSP) and the Academy of Special Needs Planners (ASNP) March 9-12, 2016 in Tucson, Arizona provided S2KM and other attendees an opportunity to evaluate the current status of structured settlements within the larger, more complex personal injury settlement planning market. The SSP conference also transferred association leadership from Neil Johnson to Joe Tombs with Tombs promising to maintain Johnson's leadership direction and to "pull SSP back completely from structured settlement politics."

Among S2KM's conference conclusions: Many personal injury settlement planners characterize structured settlements as a strategic product, and recognize new marketing opportunities for structured settlements resulting from recent legislation such as the Affordable Care Act and the ABLE Act . The traditional and collective structured settlement industry should similarly embrace an important opportunity to grow its premium volume in this larger, more complex, more dynamic market than it has in the past by more effectively:

• Analyzing the evolving personal injury settlement and special needs planning markets;
• Addressing concerns and issues about structured settlements identified by plaintiff and special needs attorneys; and
• Re-positioning structured settlements from a single product sale to the core component of an integrated settlement solution.

SSP TOPICS AND SPEAKERS

• Introduction - Neil Johnson
• Comprehensive Settlement Planning - Joe Tombs; Charly Schell; Joe DiGangi; Tim Denehy
• Rules that Apply to Insurance Brokers - David Childers; Jeremy Babener
• The Grillo Case - Craig and Josephine (Grillo) Sullivan
• The Mraz Case - Mark Wilson and Patrick Hindert
• Sudden Money - John Darer
• Alternative Products - Martha Hunt; John Arendt; James Creel; Chris Shumate; Michael Upchurch; Rick Miller.
• Medicare Compliance, Entitlement Planning and Lien Resolution Issues - Anthony Prieto
• Joint ASNP/SSP Session - Structured Settlements and Special Needs Trusts - Frank Johns; Joe Tombs; Jack Meligan.
• ELNY and Factoring Industry Lawsuits - Edward Stone
• Small Business Legal Strategies - Paul Valentine
• Missed Tax Opportunities at Settlement - Jeremy Babener
• Foreign Assignment Companies - Jeremy Babener
• NSSTA's Survey of Plaintiff Attorneys - Patrick Hindert
• SSP President's Statement - Joe Tombs

ASNP TOPICS AND SPEAKERS

• ABCs of Public Benefits - David Lillesand
• ABCs of Special Needs and Settlement Planning - Kevin Urbatsch and Michele Fuller
• Keynote: "Raising Special Kids" - Maureen Beyers & Michael Farrell
• SSI Update - David Lillesand
• SNTs and Retirement Benefits - Melanie Marmion
• Recent Trends in Special Needs Planning - Blaine Brockman
• Joint ASNP/SSP Session - Structured Settlements and Special Needs Trusts - Frank Johns; Joe Tombs; Jack Meligan.
• "Tricky Issues" in SNT Administration - Travis Finchum; Herb Thomas and Daniel Cutter.
• Ask the Experts Panel - Kevin Urbatsch (Moderator)

DISCLAIMERS: Because of overlapping conference schedules, S2KM was able to attend only three ASNP presentations but did receive and has reviewed all ASNP conference handouts. S2KM's Managing Director, Patrick Hindert, testified as an expert witness in the Mraz case concerning structured settlement and QSF issues on behalf of Adriana and Addison Mraz.

S2KM COMMENTS AND RECOMMENDATIONS

SSP Leadership

• In his closing message as SSP President, Neil Johnson continued to emphasize several positive themes including industry unification and increasing collaboration between SSP and NSSTA. Among Johnson's proposed solutions for industry unity: 1) recognizing and accepting product diversity; 2) focusing on client and customer service; 3) identifying and pursuing permanent shared interests without necessarily agreeing on all issues; 4) engaging all perspectives to discuss industry problems and issues; 5) improving relationships among stakeholder groups; 6) promoting and practicing settlement planning not settlement selling.
• Newly elected SSP President Joe Tombs promised to "maintain the direction of Neil Johnson's leadership and even accelerate it in every way possible." He identified the following "main themes" for SSP going forward: "to pull completely back from structured settlement “politics”, redouble our efforts at educating our members and promoting a Code of Ethics, and a membership push to quadruple our high water mark for number of members. We intend to actively encourage our members who sell structured settlement to join and to become actively engaged in NSSTA. We will continue to offer a hand of friendship and cooperation in their agenda although we will be decidedly apolitical. We will also make no attempt no manage our member’s opinions or their expressions of their opinions."
• As for structured settlements, Tombs stated: "we intend to emphasize comprehensive settlement planning which will have the natural result of de-emphasizing structured settlement annuities to some extent as we move alternatives including trusts, taxable annuities, investment accounts, etc. closer to the forefront. We will be increasingly product-neutral and more advice-driven and client-need-focused in the future." Note: despite Tombs' assertion, and perhaps somewhat counter intuitively, multiple SSP conference speakers maintained that settlement trust sales, in particular, have actually increased their sales of structured settlement annuities.
• Tombs also promised "to intensify [SSP's] efforts to stave off any further “infiltration" of our society by factoring companies and their employees. We will want to remain abreast of the goings on in that market as we have always attempted, but as a practical matter we are cutting off any new members or sponsors from that side of things."

Marketing Feedback - NSSTA Survey of Plaintiff Attorneys

• During 2014, the National Structured Settlement Trade Association (NSSTA) commissioned a three-part Structured Settlement Survey project, conducted by CLM Advisors, and previously reviewed by S2KM, of senior claims executives (Part 1), claims professionals (Part 2) and plaintiff attorneys (Part 3).
• Although NSSTA has made reports of all three surveys available to its members, and featured presentations about Part 1 and Part 2 at previous NSSTA educational conferences, NSSTA has not yet featured its Part 3 survey of plaintiff attorneys as an educational conference presentation. NSSTA has also prioritized "rejuvenating defense programs" as one of three preliminary "Growth Initiatives" with no equivalent current Growth Initiative focused specifically on plaintiff attorneys or personal injury settlement planning.
• As one SSP conference presentation, S2KM's Managing Director, Patrick Hindert, discussed S2KM's analysis of NSSTA's Part 3 Structured Settlement Survey which, in S2KM's opinion, provides valuable insights for improving structured settlement marketing and expanding and accelerating structured settlement premium growth. For example:
  1. Only 4% of the responding plaintiff attorneys viewed structured settlement consultants as adding value for negotiations and/or case evaluations separate from, or in addition to, their knowledge of structured settlements.
  2. 35% stated that structured settlement consultants fail to deliver value because they are concerned with structuring as much of a settlement as possible.
  3. 52% contact a structured settlement broker one week (possibly less) prior to a mediation.
  4. 38% make contact only after a case settles.
  5. 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.
  6. Although 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).
  7. Only 26% have ever structured their fees.

Settlement Planning - A Special Needs Perspective

• Most presentations by special needs attorneys at structured settlement conferences focus exclusively on special needs trusts. As one result, many structured settlement professionals fail to understand the broad and expanding scope of special needs planning - or how it impacts, overlaps with and differs from personal injury settlement planning. A similar misconception exists among special needs attorneys many of whom identify financial and insurance settlement planners exclusively with structured settlements. The title of the one joint SSP/ASNP presentation in Tucson ("Structured Settlements and Special Needs Trusts") re-enforced this misconception. Fortunately and positively, the actual presentation discussion, moderated my Jack Meligan and featuring Frank Johns and Joe Tombs, addressed a broader agenda.
• Separately, both the ASNP and SSP conferences featured multiple presentations which captured the expanding expertise of their respective members. For structured settlement professionals, S2KM found ASNP's two "Pre-Session" presentations ("The ABCs of Public Benefits" by David Lillesand and "The ABCs of Special Needs and Settlement Planning" by Kevin Urbatsch and Michele Fuller) especially informative. Also recommended for structured settlement professionals seeking a more comprehensive understanding of special needs planning: Blaine Brockman's presentation ("Recent Trends in Special Needs Planning"),
• Urbatsch and Fuller speak and write frequently about personal injury settlement planning and are recognized as leading national settlement planning experts among special needs attorneys. Their settlement planning presentations frequently discuss structured settlement "issues" - often with negative connotations and without rebuttal or explanations from structured settlement experts. What follows are structured settlement "issues" Urbatsch and Fuller identified in Tucson. In S2KM's experience: 1) many special needs attorneys agree with these issues; and 2) structured settlement proponents need to proactively respond to these issues - or risk continuing/increasing loss of potential annuity premium:
  • "Income stream is inflexible and cannot respond to emergency or major cash needs;
  • "High initial fees;
  • "Investment returns nearly always lower than what a diversified portolio would produce;
  • "Big ticket items, such as a home, cannot be easily acquired;
  • "Unscrupulous settlement planning brokers over-structuring because of high commission;
  • "Little regulatory oversight over industry – no fiduciary responsibility or licensing required to sell;
  • "Misleading statements about flexibility;
  • "How it fits into Plaintiff’s overall financial plan?

The Grillo Case

• The Grillo case, which establishes potential legal liability for plaintiff attorneys who do not advise their clients about structured settlements, was the subject of an SSP conference presentation by Craig and Josephine (Grillo) Sullivan. The Sullivans shared the remarkable life story of their daughter, Christina, the Foundation she inspired and the Texas State Statutory amendment her case helped to enact.
• For structured settlement brokers and settlement planners, the Grillo case provides a logical starting point for discussing structured settlements with plaintiff attorneys. As a point of comparison, consider response #5 above under "Marketing Feedback - NSSTA Survey of Plaintiff Attorneys."
• Another important settlement planning "takeaway" from the Sullivans' SSP presentation: both Craig and Josephine emphasized the value of Christina's original life care plan which served as a care management "roadmap" throughout Christina's life accurately predicting future needs and developments which the Sullivans would not otherwise have anticipated.
• This important observation, provided by the only care givers to appear as speakers at the combined SSP/ASNP conferences highlights an important settlement planning issue: Why do other settlement planning professionals ignore life care planners - especially considering their strategic role defining "future needs" for personal injury damage analysis, as well as future expense allocations for Medicare set-asides and Affordable Care Act coverage? For examples:
  • As leading nurse life care planner Wendie Howland stated in this 2014 S2KM interview: "I have never been asked to review a settlement plan to see how well it matches my recommendations."
  • The Urbatsch/Fuller presentation summarized above which identified multiple professionals for the "Settlement Planning Team", omitted life care planners.
  • "Comprehensive" settlement plans S2KM has reviewed typically don't include any life care plan, or other document, providing a detailed "needs analysis".
  • With the exception of the National Alliance of Medicare Set-Aside Professionals (NAMSAP), a majority of whose members are life care planners, none of the many structured settlement or settlement planning conferences S2KM has attended during the past several years has offered specific presentations addressing the topic of "needs analysis" - or, with rare exceptions, featured a life care planner as presenter.
  • Key related issues: 1) what does "needs analysis" mean in the settlement planning context? Who is qualified, if not life care planners, to provide "needs analysis" for settlement planning? What is the relationship between a life care plan prepared for trial (damage analysis) and a life care plan for settlement planning? Who, besides a life care planner, is qualified to transpose one to the other?

The Mraz Case

• The traditional objective and responsibility for plaintiff attorneys in personal injury cases has been to obtain the largest amount of compensation for their clients whether by judgment or settlement. By this standard, the law firm Lief, Cabraser, Heimann & Bernstein was notably successful in obtaining a $55 million verdict and subsequent $24 million settlement in 2009 against Chrysler in the Mraz wrongful death case.
• Settlement planning, in general, and structured settlements, more specifically, however, prioritize an additional set of objectives and responsibilities for plaintiff attorneys. As a result, when the Lief, Cabraser law firm failed to obtain a structured settlement for Addison Mraz, the minor daughter of the deceased, after her mother, Adriana Mraz, allegedly requested Lief, Cabraser to obtain a structured settlement on Addison's behalf, Adriana brought a lawsuit alleging Lief, Cabraser attorneys breached the duty of care they owed to Addison.
• On December 22, 2015, among other findings, a California trial court jury determined Lief, Cabraser attorneys did not breach the standard of care or any fiduciary duty they owed Addison Mraz. Nevertheless, unrelated to damages associated to the loss of the structured settlement, the jury awarded Addison Mraz $400,000 of fees and costs she previously paid to Lief, Cabraser. The case is currently on appeal.
• Mark Wilson, the attorney who represented Adriana and Addison Mraz in their lawsuit against Lief, Cabraser, was a featured speaker at the SSP conference. Based upon the Marz case, and regardless of what occurs on appeal, Wilson highlighted the following structured settlement responsibilities as potential duties of care for plaintiff attorneys and recommended that structured settlement professionals and settlement planners utilize CLE programs to educate plaintiff attorneys about their potential liabilities. Plaintiff attorneys should:
  • Educate themselves about structured settlement issues including how to avoid constructive receipt as well as the appropriate utilization of QSFs and non-qualified assignments.
  • Recommend competent structured settlement professionals to clients (and retain them for advice) prior to settlement negotiations.
  • Insert appropriate language in term sheets and/or settlement agreements to preserve clients' structured settlement options.
  • If and when necessary, know how to correct mistakes to preserve or re-establish their clients' structured settlement options.

Plaintiff Broker Diversification

• The most successful plaintiff structured settlement brokers appear to be diversifying their products and services. It works, according to SSP speaker Anthony Prieto, "because it changes the conversation from a marketing perspective. There are a lot more people who want to talk to me about updates in MSP compliance or lien resolution than structured settlements. You see more cases when you offer other services. You become a problem solver as opposed to a problem identifier."
• Prieto identified multiple sources of alternative revenue now available to settlement planners in 2016: alternative products (retail annuities, life insurance, managed money); trust company fees or referrals; lien resolution or verification fees or referrals; MSP compliance fees or referrals; attorney fee deferral programs; QSF referrals and administration fees.
• Although one SSP panel, discussing "Comprehensive Settlement Planning", emphasized the importance of "planning before products", another SSP panel spoke specifically about expanding opportunities for alternative (non-traditional structured settlement) settlement planning products: Martha Hunt (equity-indexed annuity riders); John Arendt (reinsurance); James Creel (settlement trusts); Michael Upchurch (rehabilitation facilities); Rick Miller (indexed annuities).
• Consistent with the themes of "diversification" and "changing the conversation", John Darer made a convincing case for "transition expertise" as a critical settlement planning skill.
• What potential professional liability issues accompany plaintiff broker product and service diversification? The SSP conference did not directly address this issue comprehensively.
  • Speaking about "ELNY and Factoring Industry Lawsuits", attorney Edward Stone asserted that the "New Normal" (i.e. personal injury settlement planning) will not work if the core product (i.e. structured settlements) does not work. Focusing specifically on structured settlements, Stone asked whether a broker (plaintiff and/or defendant) owed any duty of care - and to whom? Also whether split commission arrangements changed the analysis? Based upon ELNY, he offered several related lessons for settlement planners.
  • Insurance law expert David Childers provided SSP conference attendees with a traditional analysis of standards of care and duties of care for insurance brokers, agents and producers under Arizona law.

CONCLUSION: Personal injury settlement planning is a large, complex, dynamic marketplace within which structured settlements historically has represented a strategic, if arguably under performing, product. The traditional structured settlement industry has heretofore avoided the educational analysis and strategic association relationships necessary to help its "New Generation" membership successfully transition to the "New Normal". It remains to be seen whether, when and how successfully future industry leadership will figure out how to put old wine in new bottles. Based upon this year's joint SSP/ASNP conference (and mixing metaphors), it appears the "New Normal" train is already leaving the station with a diversified cargo of blended products and services.

For additional S2KM analysis about personal injury settlement planning, see the structured settlement wiki.

Michael Goodman Interview

During the National Structured Settlement Trade Association (NSSTA) 2015 Annual Conference, NSSTA President Michael Goodman announced an ambitious set of goals for growing the structured settlement market.

With NSSTA's 2015 Fall Conference scheduled for October 28-30 in Phoenix, Goodman agreed to an S2KM interview wherein he assesses NSSTA's progress toward achieving those goals as well as the status more generally of the structured settlement market.

S2KM: Welcome Michael and thank you for participating in this interview. Recent NSSTA conferences have emphasized the importance of "industry unity". As NSSTA president, what are your priorities for improving industry unity?

GOODMAN:  My first priority as President of NSSTA is to identify growth opportunities for the structured settlement industry.  In order to do so, we are reaching out to all NSSTA members to request that they submit suggestions and ideas to help expand and enhance the structured settlement industry.   Regardless of the focus of your business, I want all stakeholders to work together to create growth opportunities that will benefit everyone in our industry.

S2KM: During your introductory comments at NSSTA's 2015 Annual Meeting, you suggested NSSTA needs to modify its traditional "protect and preserve" political message to inspire industry growth? What alternative are you proposing?

GOODMAN:  Preserving the ability to structure cases and protecting I.R.C. Sections 104(a)(2) and 130 have always been one of the main priorities of NSSTA on Capitol Hill with Members of Congress, and it will continue to be important. We have built a strong base of political support for structured settlements in the U.S. Congress.  We have also established close organizational relationships with disability groups, consumer organizations and attorneys.  I want to use our support in Congress and work with our advocates and friends to expand the use of structured settlements.  We have a very talented and highly professional group of structured settlement consultants in our industry and we need to really look at ourselves and determine as an industry  the best way forward. For this reason, I have created a Growth Committee that includes many of the most talented and respected structured settlement industry leaders from across the country. I have asked these leaders to focus time and energy on growing the business for all of our members.  Furthermore, we just hired a new public relations company, the Pipitone Group, which is going to revamp our website and help us to get our message out to the public.

S2KM: You referenced a "Growth Committee". NSSTA recently announced an “Industry Growth Initiative.” What is the NSSTA "Industry Growth Initiative"?

GOODMAN:  Once installed as President of NSSTA, this was my first task.  First, we asked all NSSTA members to submit ideas for growth at [email protected].  To date, we have received more than a dozen exceptional growth suggestions. Second, I tried to put together a committee of leaders within the industry that have different perspectives.  There are plaintiff brokers, defense brokers, life company representatives, property & casualty representatives and folks within management of broker firms.   With this diverse group, I have asked them to review and evaluate all of the NSSTA member growth proposals that have been submitted. Third, the Growth Committee members have been asked to develop plans to implement specific growth opportunities and develop the metrics necessary to evaluate the benefits to our industry.  We just held our Board meeting and the Growth Committee presented the best ideas and we will be announcing those to the NSSTA membership shortly and discussing in Phoenix at our upcoming Fall Meeting.

S2KM: What features and benefits will the Growth Committee offer NSSTA members?

GOODMAN:   It is important to remember that the NSSTA Growth Committee represents a highly talented cross section of industry leaders and they are going to select the very best growth initiatives developed and submitted by NSSTA members.  The Growth Committee ideas were just presented to the NSSTA Board of Directors for final approval. All of the growth ideas approved by the Growth Committee will be provided to all our members and everyone in our industry will be invited to assist efforts to implement the new growth initiatives. 

S2KM:  What metrics will determine the scope and time framework for success of the Growth Initiative?

GOODMAN:  Establishing clear metrics from the outset is critical for the success of the Growth Initiative.  Every growth project proposal submitted by NSSTA members will be fully analyzed to determine the scope of the project, the cost to implement the project and the time frame necessary to complete the project.  Most importantly, the Growth Committee will work to determine the potential benefits for our industry and our members. Once I formed the committee, it was then necessary to pick folks that were willing to lead.   My brother Bill, John McCulloch, Sean Coleman and John Arendt were selected to lead this initiative.  During our very first phone call, this was the first question that arose.   How are we going to define success and what metrics should we utilize to determine what is the best idea.  This is an ongoing debate, but with the leaders of the committee, I have complete confidence that we will have a defined path with clear goals.

S2KM: Will NSSTA's "Growth Initiative" prioritize new markets for structured settlements, expansion of traditional markets or both?

GOODMAN:  That remains to be seen.  However, I think it is important to have a completely open mind.  Our industry has changed.   We are no longer simply annuity sales folks.   With the need to understand Medicare, Medicaid, The Affordable Care Act, Lien Resolution and so much more - to be effective, it is necessary to be a settlement consultant with a wide range of knowledge.  Furthermore, the plaintiff practice has changed.   This inevitably has also led to changes within the settlement consulting landscape.  

S2KM: Which "new" or non-traditional markets do you view as most promising for structured settlements?  

GOODMAN:   There are several non-traditional markets that we are exploring.  Several ideas were proposed to the Growth Committee.  One idea in particular focuses on trying to structure FECA claims.  Federal Employers Compensation Act is the corollary to worker’s compensation for federal employees.  The government self-insures this exposure.  The system spends about $3B per annum on claims.  We are going to see if we can start utilizing structured settlements on these claims.  Separate and aside, I think it is important for us to go back to our traditional base as well.   Certain casualty programs have lost interest and it is necessary to re-engage these clients.

S2KM: NSSTA recently completed a three-part survey of its traditional sales targets: senior claims executives, claims professionals and plaintiff attorneys. What were the most important findings for purposes of NSSTA's "Growth Initiative"?

GOODMAN:  NSSTA has worked with CLM Advisors on two major surveys with more than 200 senior claims officials to find out what claims professionals think about structured settlements.  What we learned from the surveys includes the fact that an overwhelming majority of senior claims officials consider the use of structured settlements very important to their business.  Senior claims executives also reported that structured settlement consultants are well trained and provide valuable professional services. Claims officials also reported that structured settlement consultants have the ability to help identify and meet the needs of the injured party.  We also found out that senior claims officials would like more training regarding the benefits of structures generally, the use of structures in claims that involve Medicare Set-Asides and negotiation strategies when using structures. NSSTA has recently launched NSSTA University, where our members can secure continuing education credits through the state department of insurances for their structured settlement presentation to adjusters. This will allow our members to build those relationships critical during the claims negotiation process. The best way to connect with the claims professional is through education.

S2KM: Based on recent Towers Watson studies, S2KM has estimated that more than $170 billion of United States tort costs (excluding workers compensation) represented payments to injury victims and their attorneys during 2014 compared with $5.3 billion of structured settlement premium (including workers compensation). How large is the potential U.S. annual structured settlement market?

GOODMAN:  My own estimate of potential market size for the structured settlement industry is in the $8 to $10 billion range per year.

S2KM: Traditional public policy justifications assume and maintain "structured settlements enable injury victims to live free of reliance on government assistance." This statement, on its face, does not appear to acknowledge:

• The use of structured settlements to fund Medicare set-aside arrangements (MSAs) and special needs trusts (SNTs); and/or
• A strategic role for structured settlements in personal injury settlement planning which has been defined as "ensuring that a plaintiff who has a significant disability, lacks capacity, or has a complex financial situation will receive his or her litigation proceeds in such a way that it will not jeopardize his or her future retention of other benefits."

Isn’t it time to modify this traditional public policy justification to recognize how structured settlements can also be utilized to preserve and/or maximize public benefits?

GOODMAN: This has been an area of focus and we have a task force that is looking how best to promote structured settlements use in the government benefits arena.   We are reaching out to various groups and associations to ensure that we work together to grow the industry. We are working with the Special Needs Alliance, the Academy of Special Needs Planners, the National Academy of Elder Law Attorneys, and National Alliance of Medicare Set-A-Side Professionals to name a few. Within NSSTA, our task force includes Patrick Hindert, John McCulloch, Len Blonder and me.

S2KM: You have been a critic of "interest rate selling" as a detriment to structured settlement industry growth. What do you mean by "interest rate selling" and how can such selling be avoided in a low interest rate environment?

GOODMAN:  Far too many brokers focus on interest rates when selling structured settlements.  This makes the structured settlement strictly an investment.  My goal is always to focus on future needs.   There is no other investment that can produce the same security and tax-free payments.  I look to have a structured settlement in place to cover the recurring future needs.   If you utilize a structured settlement in this fashion, the interest rate becomes irrelevant.  

S2KM: The National Association of Settlement Purchasers (NASP) has announced that you will be a featured speaker at NASP’s 2015 Annual Conference. Why did you (presumably with NSSTA’s Board of Director approval) agree to participate at a NASP conference?

GOODMAN:   We have worked very hard to address some of the “loop-holes” in certain State Structured Settlement Protection Acts.   Craig Ulman’s efforts have been amazing.   By the end of the 2016 state legislative sessions, I expect we will have tightened the structured settlement protection acts in as many as four of the states with weaker statutes.    Wisconsin and DC should have enacted strong statutes.   We have worked with NASP to try to ensure that plaintiffs have to attend hearings if they want to factor their settlement funds.  We also want to avoid forum shopping by factoring companies.   In addition, we want plaintiffs to have to disclose whether they have previously sold any portion of their structured settlement.  Rather than disagree with NASP, we have focused on trying to find common ground to provide even more consumer protections for our annuitants.

S2KM: Why have so many life companies (annuity providers) exited the structured settlement market - and what can NSSTA do to attract new companies to the market?

GOODMAN: While some life companies had exited our industry, we have also gained new firms over the past few years.  We are working on encouraging more life companies to join the industry.  That being said, I think we need to continue to be thankful and honor those companies that are currently in our marketplace.

S2KM: With the retirement of an entire generation of pioneering structured settlement brokers, does the primary market face a "succession crisis"?

GOODMAN:   I wouldn’t say we have a crisis, but it is certainly a concern.  We are looking to address the issue.  Melissa Price, from SFA, is researching new ways to offer training for new brokers.   This has always been an issue.   Our industry provides a great service and I am sure we will attract new brokers.

S2KM: Going forward, what professional backgrounds and/or skill sets best qualify an individual for success in the structured settlement market?

GOODMAN:   It is very hard to predict who will succeed and who will fail in this industry.  There have been folks that I thought would be a huge success and instead they have gotten out of our industry.   Obviously, it has become a much more complicated process over the past decade.   Understanding law, claims, public benefits and finance has become a necessity.   The most important quality to have in our industry is compassion.

S2KM: NSSTA has recently added multiple new educational programs for its members - for examples: Structures 202; "NSSTA University"; the MSSC Program. Do you see the need for any additional new and/or improved NSSTA educational initiatives?

GOODMAN:   As previously mentioned, we are looking to create new training programs for brokers that are brand new to the industry.   Other than that, I believe NSSTA has done a great job with its current educational initiatives.

S2KM: What lessons, if any, did NSSTA members learn from the ELNY liquidation that will improve the structured settlement market going forward?

GOODMAN:   I believe the entire experience educated brokers.   I believe it has made us look into the financials of each life company and made us understand how to address concerns.  Lastly, I believe split-funding has become much more commonplace.

S2KM: In addition to what we have already discussed, what other priorities, if any, have you identified for your term as NSSTA president?

GOODMAN:  My main priority is to grow the industry.  I am excited about the ideas that have been presented.  I am also excited about the enthusiasm that has been created.   I am proud that this effort has brought everyone together to focus on a common theme:  how to grow the industry for all.

S2KM: Thank you, Michael - and continued success for the remainder of your term as NSSTA President.

For additional and related recent S2KM reporting about NSSTA, see:

• NSSTA 2015 "Structures 202" Conference
• NSSTA 2015 Annual Meeting
• NSSTA Marketing Surveys: Senior Claims Executives; Claims Professionals; Plaintiff Attorneys 

NSSTA Marketing Surveys - Claims Professionals

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.

CONCLUSIONS

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.

• RESPONSE:
  • 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?

• RESPONSE:
  • 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)?

• RESPONSE:
  • 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?

• RESPONSE:
  • 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?

• RESPONSE:
  • Persuasiveness
  • Responsiveness
  • 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?

NSSTA Marketing Surveys - Senior Claims Executives 3

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 FINDINGS:

• 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 FINDINGS:

• 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.

NSSTA Marketing Surveys - Senior Claims Executives 1

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."

NSSTA's new Growth Initiative appears to potentially address, and/or encompass, multiple growth-oriented goals NSSTA president Michael Goodman identified during NSSTA's 2015 Annual Meeting.

Rationale for a Growth Initiative: annual structured settlement premium reached its historic 12 month industry record of $6,226,578,725 in 2008 after consistently averaging close to $6 billion annually from 2001-2007. Annual premium totals dropped off sharply from 2009 (following the 2008 financial crisis) thru 2012 before showing modest improvements in 2013, 2014 and First Quarter 2015.

NSSTA's Growth Initiative also appears to build upon other recent NSSTA projects including a three-part structured settlement survey commissioned by NSSTA, and conducted by CLM Advisors, of NSSTA members' traditional sales targets: senior claims executives (Part 1); claims professionals (Part 2); and plaintiff attorneys (Part 3).

Although individual interpretations may differ, each of NSSTA's three surveys identified opportunities to expand the use of structured settlements and therefore each offers valuable insights for NSSTA's Growth Initiative.

For example: 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.

Results of that survey, however, also suggest to S2KM that future defense-driven structured settlement market growth will require consultants to:

• Reformulate traditional structured settlement education programs applicable to property and casualty insurance clients; and
• Help these clients identify and produce better metrics and analytics: 1) to define the meaning of structured settlement "success"; and 2) to determine related program effectiveness.

To help "identify opportunities to expand the use of structured settlements", S2KM will offer its summary and analysis of NSSTA's three-part survey in a series of blog posts beginning with NSSTA's survey of property and casualty insurer senior claims executives. The remainder of this blog post summarizes findings from that survey. In two subsequent blog posts, S2KM will offer its interpretation of that survey's results.

NSSTA Survey of Senior Claims Executives - Summary

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."

The survey focused on answering two questions:

• "What do senior claim executives in the property casualty insurance segment perceive to be the primary values created by structured settlements and settlement consultants?"
• "In claims organizations which do not provide their own underwriting markets for structures, to what degree are there mechanisms in place for promoting, measuring, and managing structured settlements utilization?"

Survey participants were selected by CLM Advisors 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.

Survey questions were organized within the following categories:

• General Trends
• Program Attributes
• Perceptions Around Value
• Reactions to Value Proposition Statements
• Forced True/False Choices
• Extracting Future Value

Although all of NSSTA's claims executives survey results provided useful feedback, some of the survey responses were predictable and unlikely to impact future structured settlement marketing. For examples:

• 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.
• Almost all 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 with varying internal stakeholder "ownership".
• The types of cases where survey participants viewed structured settlements as most effective: liability cases; minors cases; workers compensation cases; lifetime benefits; medical payments.

Other selected survey responses, as categorized and summarized below by S2KM, provide greater informational value for subsequent S2KM interpretation and analysis.

Structured Settlement Program Metrics

• 100 per cent of the survey participants said their companies could do more to proactively use structured settlements.
• Only 20 percent of the survey participants reported having any set of objectives around the use of structured settlements.
• A majority of the survey participants do not measure referral volume and only half measure the volume of successfully written structures.

Structured Settlement Value Propositions

• 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.
• Although still in agreement, survey participants viewed two traditional structured settlement value propositions less strongly: 1) lower claims payouts; and 2) earlier claims resolution.
• Survey participants disagreed with the following structured settlement value propositions: 1) achieve earlier settlements; 2) benefit to society; 3) 35 per cent savings on MSAs; 4) equally effective on smaller and larger claims.

Structured Settlement Consultants

• 90 per cent of the survey participants believed consultants do a good job of describing their value.
• Survey participants viewed consultants' primary value proposition related to their knowledge of, and ability to sell, structured settlements.
• 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.
• 90 percent believed involvement of a structured settlement consultant made a case more likely to settle.
• Survey participants, on average, believed their companies utilized structured settlement consultants in only 66 percent of appropriate cases.
• Two thirds of the survey participants believed that front line claims professionals in their organizations shared their perspective on a consultants' value.

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 will analyze selective findings from NSSTA's survey of senior claims executives in two subsequent blog posts.

S2KM summarized historic structured settlement surveys which preceded NSSTA's three-part survey project in this prior blog post.