by John Darer CLU ChFC CSSC RSP
Liberty Life Assurance Company of Boston will split structured settlement payments effective February 1, 2013, thereby removing the need for servicing arrangements when Liberty Life annuitants move to sell only a portion of their structured settlement payment rights.
I have written extensively on the subject of structured settlement servicing and see this action by Liberty Life Assurance Company as positive. Liberty is not encouraging factoring, however Liberty is doing the right thing for its annuitants, for the structured settlement industry and rightfully protecting its brand.
- If one has to go down the road of selling structured settlement payments (due to a lack of feasible money raising alternatives), it makes sense to sell as little as possible so as to preserve the stable source of income that the structured settlement provides.
- When a servicing agreement is necessary, because the structured annuity issuer will not do "the split", the entire payment is transferred to the factoring company and the annuitant must rely on the servicer to split the payments. This can result in delays and may also expose the payee to the bankruptcy of the servicer [ note that some companies have back up servicers]
- Structured settlement payment servicing results in lost branding for a life insurance company because in many cases, routine customer contact (change of address, beneficiary etc) must flow through the servicing company. A bad experience with the servicing company could potentially harm the reputation of the insurance company, the structured settlement broker or settlement planner who placed the annuity in the perception of the annuitant. In 2009, I spoke with a Connecticut annuitant, who was rebuffed when contacting them with a question and referred to a servicer, which turned out to be the same factoring company she had sold only 16% of her monthly structured settlement payment rights!
It was important to elevate the awareness of issues related to servicing of structured settlement payments, as I did in blogs and video podcasts beginning in 2009.
Note that transfers of structured settlement payment rights must be approved by a judge as being in the best interest of the structured settlement payee and any applicable dependents. Structured settlement factoring transactions are subject to the provisions of Internal Revenue Code Section 5891 and applicable state structured settlement protection acts.
Liberty Life Assurance Company of Boston, has been in existence for almost half a century and is a subsidiary of Liberty Mutual Insurance Company, a company with over 100 years in insurance. Though the BARCO Assignments, Ltd. non qualified assignment facility, Liberty Life Assurance Company of Boston gives structured settlement consultants and settlement planners tools to offer innnovative solutions for claims and litigation where there are taxable damages.