by John Darer® CLU ChFC MSSC CeFT® RSP CLTC
Structured Settlement Commissions
Virtually every structured settlement broker or structured settlement planner boldly states that either:
- They work for free
- There is no charge for their services
- There is no cost for retaining their structured settlement brokers
- There is no cost for retaining their settlement planners
How can structured settlement brokers or settlement planners work for free and afford to make contributions to buy influence with trial lawyers?
It's common knowledge to lawyers, but perhaps not to injured persons that many of these structured settlement brokers, settlement planners and/or their firms are contributing big money to state and national trial lawyer associations to buy influence or access, sponsoring RIMS or other legal or insurance conferences, taking out big expensive full page ads in Business Insurance, paying money to the campaign of your lawyer's favorite political candidate, taking your lawyers and colleagues to ball games in catered corporate suites, flying lawyers around in private aircraft, some boasting of virtually unlimited financial resources. It's their marketing prerogative of course.
But the truth is that structured settlement brokers or settlement planners DO NOT REALLY WORK FOR FREE. For appointed agents of an annuity issuer (a population that includes settlement planners), compensation is paid by commission (or share of commission where there is more than one agent/broker planner) from the placement of a structured settlement annuity as a "qualified funding asset". Some settlement planning/structured settlement firms disclose this upfront in their web advertising, others do not. This contingent compensation is not unlike the services of a real estate broker that you might engage, the lawyer that you retained to prosecute your lawsuit, or an agent that sells you a life insurance policy. A structured settlement annuity is an insurance product sold by licensed and appointed agents and/or brokers.
How Much Do Structured Settlement Brokers or Settlement Planners Get Paid?
Commissions Vary By the Type of Product Placed
A. Structured Settlement Annuity Funded Structured Settlements
The pricing of a structured settlement annuity, including the indexed linked annuity payment adjustment rider offered by Pacific Life, includes a uniform commission structure, which is 4 percent of the premium placed with the annuity company. As I understand it the uniform commission was intended to eliminate selection bias that might exist if one company paid more compensation than another. The qualified assignment fee (ranging from $0 to $750) is commissionable with some companies. In other cases it is not. Insurance laws in effect in most states expressly prohibit reduction of commissions or rebating.
No Assignment Fee/Not applicable: Berkshire Hathaway Life of Nebraska, First Berkshire Hathaway Insurance Company and National Indemnity Company (reinsurance structured settlement)
Commissionable Assignment fee: Pacific Life Insurance Company, Pacific Life and Annuity Company, American General Life (AIG), United States Life Insurance Company in the City of New York (AIG) and United of Omaha (Mutual of Omaha). have commissionable assignment fees
Non-Commissionable Assignment Fees: New York Life, Independent Life, Prudential Insurance Company of America, USAA Life, Metropolitan Life Insurance Company, Metropolitan Tower Life Insurance Company
B. Market Based Structured Settlements
There are different market based structured settlement options for both plaintiffs and attorney. Depending on the solution there could be recurring fees of1%, 1.5%, 1.75% or more charged annually, or debited from account balances on a quarterly basis. So a $1,000,000 into a market based structured settlement could cost $10,000, $15,000, $17,500 annually. Using a simple example, a 1.5% fee on $1,000,000 could result in $150,000 in fees over 10 years, even without any growth (15,000 times 10). Some providers offer volume discounts. One attorney fee solution provider charges 1% annually and then breakpoints lower at $5M.
Updated March 28, 2021