Mining For Prospects In Structured Settlements Mkt.

Mining For Prospects In Structured Settlement Mkt.

By Don McNay

Source: National Underwriter Life & Health

Using structured settlement annuities to settle personal injury claims has become approximately a $3-to-$5 billion industry. It is a market that has generally been left to specialists and most insurance agents have had little opportunity to participate. Over the past 14 years, I have seen numerous people try to break into the business. There are ways for an agent to participate in the structure settlement business by using some of the following tips.

Traditionally, the purchase of structured settlements has been driven by casualty insurance companies. Companies have seen structures as a way of saving money on claims and settling cases that normally might not be settled for a lump sum. Casualty companies present the best opportunity as they can have numerous large dollar claims for which structured settlements might be appropriate, particularly insurers that cover medical malpractice and liability claims.

This also is the hardest market for an inexperienced person to break into. Every major casualty company has been prospected by structured settlement consultants and most either have a relationship with an established structure broker or do their structures in-house with an affiliated life carrier.

Therefore, unless a structure broker has a close personal connection or can bring other considerations to the carrier, the approach may not be successful. However, areas of the casualty insurance market still are under-prospected.

For instance, tremendous growth potential exists for structured settlements in areas such as workers' compensation, employment litigation and environmental cleanup. There is also potential with self-insured companies, self-insurance groups and government entities. Many of these organizations have a number of claims and have had little experience with structured settlements.

The mistake most newcomers make is thinking that contacts with a few attorneys can put them in the structure business. Secondly, they do not focus on the type of attorney who can bring in a steady stream of good cases. It is rare to have a structured settlement with someone who does not specialize in the personal injury law. A general practitioner who does wills, divorces and some injury cases will be lucky to have one case a decade. The best attorney to refer structured settlement business is a personal injury specialist with a good reputation with other trial lawyers. Most think of personal injury lawyers exclusively as the lawyers you see on television. "Television lawyers" tend to have a high volume of personal injury cases, but few will get a large volume of large-dollar injury cases.

It takes a high number of referring attorneys for an agent to make a living doing structured settlements. Even the best will only refer 5 or 10 cases a year for a structured settlement. A major caveat of working with plaintiffs' attorneys is doing a lot of work and not being paid. Traditionally, the insurance carriers have dominated the structured settlement industry. It is not uncommon for a plaintiff's broker to do a great deal of work for an attorney and then be cut out of any commission by a structure broker affiliated with the casualty company. Some mechanisms have developed to allow a plaintiff's broker to receive his fair cut, but most depend on the plaintiff's attorney aggressively protecting the broker and making sure that the broker is compensated.

For fee-based insurance consultants, there is also the possibility to advise an attorney on a fee basis or hourly rate. A number of national structured settlement brokers also use this method exclusively and it is probably an under served area.

The decision to look at using a structured settlement is usually made in a casualty insurance claims department by a claims manager or claims adjuster. Provided that the company that the adjuster works for does not have a relationship with a structure broker or does not use an affiliated life carrier, this can be ~an excellent place to prospect. The way to develop a relationship with an adjuster is to help them do their job better. An adjuster wants to settle a claim fairly and quickly, then go on to the mountain of paperwork on his or her desk. It is important that an agent be respectful of their time and recognize that making their lives easier by assisting in paperwork, doing legwork and evaluating a case is the quickest way to become valuable to the adjuster.

Going for a "quick sale" and harassing an adjuster on slow-moving cases is the quickest way to lose an adjuster and often turn them off to the entire structured settlement process. Often a person will wind up not taking a structured settlement but settling for all or part of the settlement in cash. This gives tremendous opportunity for other types of planning opportunities, such as mutual funds, variable annuities, trusts and insurance. The plaintiff attorney usually receives roughly one-fourth to one-third of the settlement and will have financial needs as well.

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