My Letter to the Editor on Structured Settlements

My Letter to the Editor on Structured Settlements

I’m not usually one to throw stones.

But an article recently appeared in the Daily Journal that raised my ire sufficiently to elicit a response. I’m attaching a copy of my rebuttal Letter to the Editor, published January 13, 2010 in both the San Francisco and Los Angeles editions, for your convenience.

Structured Settlements Offer Financial Security in Good and Bad Times

The Dec. 4, 2009 article by David Higgins (“Recession’s Effect on Settlement and Fees”) was loose with its facts and illogical in its conclusions.

For starters, the author simplifies the very complex subject of economics. How can he know what the future holds? If he does, then that puts him above the likes of Paul Volcker and Warren Buffett. Of special note, particularly in light of Higgins’ assurances that inflation will rise, was the economic community’s collective failure to predict our current “Great Recession.”

Second, his recommendation that people should rethink structuring their settlements and their attorney fees simply because interest rates are “at historical [sic] lows” completely misses the mark and is ingratiatingly misleading. Some things just make sense regardless of economic realities and it’s doubtful that guaranteed, tax-advantaged future income tailored to an injury victim’s (or an attorney’s) specific living needs will ever fall out of favor.

Third, let’s put today’s rates in context. Long-term interest rates have been at or below 4 percent for 71 out of the last 135 years (Irrational Exuberance, Princeton, 2005). That means since the late 19th century, interest rates have been about where they are now for more than 50 percent of the time. The last time rates were at current levels for longer than a year was 1924. They remained there for 35 years.

Finally, Higgins neglected to reference his primary connection to the structured settlement industry these days: He sells his services to clients who, for a variety of reasons, need or wish to establish a qualified settlement fund (QSF) when settling their lawsuit. While a QSF can be a necessary and useful tool in some situations, quite often it merely adds an unnecessary (and often costly) layer to the settlement process. In nearly 20 years of providing structured settlement products and services to clients across the country, I have seen very few situations where a plaintiff would have been financially better served by choosing to establish a QSF.

There’s no doubt that careful thought must be given to a client’s overall situation before deciding on which settlement option is right for them. But an unbalanced article that uses fear to discount the proven and universally accepted value of a properly crafted structured settlement plan does a disservice to all attorneys and the clients who trust them to negotiate fair settlements. Structured settlements offer financial security in good times and in bad. Attorneys and their clients who reject them out of hand based solely on assumptions about the future may wish to heed Benjamin Franklin’s maxim: “One today is worth two tomorrows.”

Dan Finn, CPCU, CSSC
President, Finn Financial Group
Newport Beach

The original article I took aim at was so full of conjecture, hyperbole and mean-spiritedness that it’s hard to imagine anyone not being able to see past its transparency. Suffice it to say the author distorted facts to argue his case that structured settlements were probably not a good idea in this economy (while not-so-subtly promoting his own agenda, by the way).

In addition to my Letter to the Editor, here’s some bonus contrarian data to support my belief that the exact opposite is actually true:
In the first quarter of 2009, fixed annuity sales grew by 74% over the same period in 2008 according to LIMRA International, Inc. (Thomas, Trevor. “Fixed Annuity Sales Surge,” National Underwriter, May 29, 2009).

That’s $36 billion worth of annuity purchases, in one quarter alone, that suggests people were fleeing their more risky investments in favor of a surer thing.

The need for safety and financial security transcends economy just as it does age, size, gender, race, nationality, creed, or almost anything else. Safe, secure, tax-advantaged, guaranteed income has a place in any economy. Don’t fall into the trap of trying to out-smart the future. She always wins!

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