by John Darer® CLU ChFC MSSC RSP CLTC
Allstate Life Insurance Company has taken a leadership position in the battle against high teen structured settlement factoring discount rates by lowering the discount rate it charges its structured settlement annuitants for the liquidity feature, to 8%. It had been 11% since the inception of the AFEN rider (AFEN is the acronym for "Advanced Funding Exchange Notice")
AFEN offers an alternative to holders of structured settlement payment rights who may later need liquidity, that has not been officially adopted by other companies to date (except perhaps Symetra which essentially owns its own in-house factoring company, Clearscape Funding).
The AFEN is available to Allstate structured settlement annuitants with a structured settlement that is funded through either Allstate Life Insurance Company or Allstate Life Insurance Company of New York. If you are receiving structured settlement payments from Allstate, don't run to the funny ads (or the funny pages). Call Allstate's AFEN unit first! Any competing offer will have to have a discount rate better than 8%.
The move is smart one for Allstate because it improves their product. It is also smart branding. A number of structured settlement annuity issuers lose branding and customer contact to servicing agreements. Servicing agreements occur when an annuitant only wants to sell part of their structured settlement payment rights and the annuity issuer will not split (dice) payments. For an industry that is concerned about losing its branding to structured settlement factoring companies, I'm surprised more companies are not openly offering a similar liquidity feature.
This is not the end of the world for structured settlement factoring companies by any means because (1) there are current structured settlement annuity issuers who have yet to provide an AFEN-like feature (2) there is a universe of structured settlement payment rights written by insurers who no longer write them. Perhaps it's a shot across the bow.
Related posts on the subject
Commutations and Structured Settlements November 22, 2011