Structured Settlements Still Used In Workers’ Comp Today

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Structured Settlements Clients Self-Insured

Workers Compensation structured settlements has been a hot topic in the past.  In talking with our self-insured clients, we have been reminded that we should produce a few more articles that pertain to the challenges of the self-insured arena.

 

Foreign structured settlements money
Wikimedia Commons – epSos.de

We have been engaged in various claim projects and have recently conducted several surveys, where workers compensation structured settlements were widely utilized to ensure quality financial outcomes and reduce expense. A structured settlement is a financial or insurance arrangement that includes periodic payments that a claimant accepts to compromise a statutory periodic payment obligation or to resolve a personal injury tort claim.

Structured settlements have been utilized extensively for high value personal injury cases in the past. However more recently, have been used for a wide variety of circumstances including Medicare Set-Asides and Special Needs Trusts.

When the self-insurer or insurer settles a case with a claimant, it finds itself with a long term payment obligation. To fund the obligation, the defendant takes one of two typical approaches; delegates its periodic payment obligation to a third party who purchases an annuity (“assigned”), or purchase an annuity from a life insurance company (“buy and hold”),

Money structured settlements on hand
Wikimedia Commons – At.morey.tota

In the “buy and hold” type of case, the defendant retains the periodic payment obligation and funds it by buying an annuity from a life insurance company. The payment stream purchased under the annuity matches exactly, in timing and amounts, the periodic payments agreed to in the settlement agreement. The self insured defendant or insurer owns the annuity and names the claimant as the payee under the annuity, thereby directing the annuity issuer to send payments directly to the claimant. If any of the periodic payments are contingent on someone continuing to be alive, then the claimant (or whoever is determined to be the measuring life) is named as the annuitant under the annuity.

In an “assigned case”, the insurer or self insured defendant does not wish to retain the long-term periodic payment obligation on its books. Accordingly, the insurer or defendant transfers the obligation, through a legal device called a qualified assignment, to a third party. The third party, called an assignment company, requires the insurer or defendant to pay it an amount sufficient to enable it to buy an annuity that will fund the newly accepted periodic payment obligation.

While each method has its advantages, there has been an overwhelming acceptance of the “assigned” case method to reduce financial exposure and cash flow obligations and eliminate liability from the risk takers balance sheets. Either method will allow an organization to improve their financial condition and to gain strategic advantages over the competition.

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James Moore

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Mgmt Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications

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