In last weeks commentary on the hidden secrets and past issues of the structured settlement profession I posed the following challenge:
“ So the question now is, once these programs( rebating, steering and post case underwriting) are ended, will the newly transparent process that allows the injury victim and their lawyer greater understanding of the structured settlement pricing process, continue to provide sufficient economic benefit to casualty companies to promote structured settlements?”
Until we as a profession answer this one fundamental question, I believe any other initiative to boost sales from the consumer side of the transaction is destined to face a very long, slow road to productivity and sales numbers equal to what our profession is use to enjoying.
Let us first assume that given the current economic, regulatory and legal climate that the days of rebating of commissions, steering structures to internal life markets or using approved lists to point premium to a select group of life companies either has, or will shortly, come to an end. Given the light being shined on the practices, coupled with legal and regulatory pressures, one of the main engines that drove the claims industry’s advocacy of structured settlements is being removed.
What does remain however, is the fact that present value and life time payment benefits of using structured settlements, coupled with their tax free payment status, can still offer a substantial opportunity to provide greater guaranteed benefit dollars to claimants than they can obtain through traditional investment options. I believe this core benefit, which has admittedly shrunk over the past ten years as both interest rates and marginal tax rates dropped, will shortly see a resurgence when both tax rates and interest rates inevitably rise.
However, claims professionals and structured settlement brokers working on the defense side, have in my opinion failed to drive home and clearly quantify to claims departments exactly how much money this transaction can save on claims. Instead they have focused and marketed the more questionable benefits of rebating, post settlement underwriting and steering as to why claims departments should use structures. I know the mere mention of these to defense brokers and claims professionals will bring the usual denials, but lets get real here and admit just how important those tactics have been over the last twenty years. Instead of denying or defending them, lets get past it and move back to what always has worked on our product, which is using the structured settlement to bridge a gap between what the plaintiff needs and what the defendants wants to pay.
I’m not the right person, given my practices emphasis on working with plaintiffs and trial lawyers, to address and quantify this value proposition for defendants. However, if there has been a serious initiative to educated claims departments on the classic use of the structure in the past ten years, I certainly have missed it. I would love to see one of the big defense firms come out with a legitimate, peer reviewed, white paper that quantifies for claims professionals the actual dollar savings for casualty companies from using structured settlements as a integral part of their claims process. Unless or until someone has it, provides it to claims companies and spreads it across the defense industry, we can continue to see fewer and fewer defense initiated structured settlements as claims professionals question the value proposition for using structures.
So, that said my real objective in this week’s commentary is to drive home, much as last weeks episode of Mad Men did, that instead of staying stuck in the same conversation about the past sins and problems of our profession we need to talk about what is right with our profession. We need, in the words of Don Draper, to change the conversation and get out of the death spiral we have been in for the last three years. Just as the partners at the fictional Sterling, Cooper, Draper and Pryce needed to move past their obsession with losing the Lucky Strikes account and take a bold new approach against smoking, we as a profession have got to change our conversation from the defensive to a bold proclamation of what is right and good about using structures on BOTH sides of the transaction.
Lets face it, if all we talk about is what's wrong with structured settlements, both publicly and privately, then the logical end result is will likely continue doing fewer and fewer of them. Sure low interest rates play a part, but a bigger issue is a fundamentally flawed conversation about their value, both with defendants and plaintiffs, and until we change the conversation from what is wrong to what is right, we can expect more of the same.
I believe that if you can’t in fifteen words or less tell a claims professional, judge or trial lawyer why a structured settlement is the best option for settling a case, you probably aren’t going to see much sales growth in your office or firm.
“It provides guaranteed after tax money you will never out live.”
“It provides a measurable savings, using present value, on the cost of casualty claims.”
“It bridges the gap between what clients need and what defendants can pay.”
See, it’s not that hard is it?
Lets continue working to change the conversation to the amazing value of structured settlements and get off the same excuses we have heard for years now. Rates right now are low, but they aren’t going to stay low, and clients still need to invest their settlements, and a properly designed and managed structured settlement addresses peoples needs in the vast majority of cases. Don’t use low rates as an excuse, ALL rates are low! Instead focus on cash flow planning, reinvestment of funds and how to secure the plaintiffs needs. Low rates are as much an opportunity to speak to people as high rates, you just need to discuss the strength of the product and use the flexible design of structured settlements to solve their problems in ways other products can’t.
Finally, in this weeks Thursday follow up I will begin to take a look at the failure of plaintiff settlement advisors in the same light I have cast defense brokers over the last week. A lot of the shrinkage in the use of structures can be laid at the feet of the plaintiff brokers, whose misinformation about defense tactics, sloppy sales practices and slavish devotion to trial lawyer groups, has further diminished the value of structured settlements in the eyes of many trial lawyers and plaintiffs.
( Mark Wahlstrom is the host of The Settlement Channel, the President of Wahlstrom & Associates and is widely considered one of the nations leading experts on structured settlements, structured legal fees and settlement planning.)