by Structured Settlement Watchdog
With curious timing after the AIG Structured Settlement Class Action was Dismissed with Prejudice by Massachusetts Federal Judge Gorton, a couple of writers have suddenly piled onto Pacific Life Insurance Company and its annual sales trips for 25-30 top producers.
The turrets, if any, should be on plaintiff settlement planners, not Pacific Life. Settlement planners and plaintiff structured settlement brokers are in the best position to influence acceptance of structured settlement product selection, not life insurers or defense experts.
The first article is authored by Dennis Beaver, an attorney from Bakersfield California with whom I share mutual respect, but disagree with him on suggestions that this is fruit for a class action. The second article is written by "Rachel Summit" a writer for Annuity FYI/Burgess Wever.
In the dismissed AIG Structured Settlement Class Action, it's notable that one of the counts dismissed was an alleged issue of undisclosed broker compensation.
The Giant Steering Leap
The central premise of the two articles and the Ethan Wolff-Mann Yahoo article which I addressed in February 2018, is that these trips raise the possibility that settlement planners steer business to Pacific in the hopes of filling one of what amounts to 25-30 slots. Possibly the most curious commentary is that of Sequence Media, whose CEO is a long time industry colleague and settlement planner from Arizona. The headline from SMG on YouTube 7 months ago was "Pacific Life Offering Structured Settlement Brokers Possible Incentives". Why was it presented as if it was sudden news, when the CEO of Sequence Media has been in the business for over 30 years and well aware of the trips? Why did Sequence Media carefully select the term "structured settlement broker" and not include "settlement planner" a self-descriptive term used by the Sequence Media CEO himself?
A Spicy Coincidence? You Make the Call.
- The Ethan Wolff Mann Article and the Sequence Media video about "possible incentives" were published in February 2018 during the same week as AIG filed its Reply Memorandum of Law in Support of Motion to Dismiss Plaintiffs' Amended Complaint.
- It should be noted that a Think Adviser article by Warren Hersch about the AIG suit, was published one day after the Reply Memorandum of Law in Further Support of Defendant's ultimately successful Motion to Dismiss The Complaint against AIG filed May 10, 2017. A week later plaintiff co-counsel Dick Risk's missive was published in The Hill publication.
- It should be noted that the Beaver publications and the Rachel Summit publication were published shortly after the AIG case was dismissed on all counts, with prejudice on September 27, 2018.
- Sequence Media published 3 videos about the AIG Structured Settlement Class Action within three weeks of its filing in January 2017 yet has not published anything since the September 27, 2018 dismissal. I reached out to Mark Wahlstrom two weeks ago and he wrote in an email that he was busy working on cases and that the lead reporter was on holiday at the time. He said they were planning to address it.
Dennis Beaver's Article
Beaver's article was picked up by Kiplinger's this week after it ran in a small publication last week. He and I have both spoken and communicated since his article was first published. I communicated to Beaver where I felt he was wide of the mark:
Beaver imputes huge ethical problems but supported them with weak and flawed assumptions. He says:
"The evidence appears to show that these trips affect what structured settlement planners promote to accident victims. According to LIMRA data, Pacific Life’s structured annuity sales dropped nearly 10% between 2013 and 2014, when the company did not offer incentive trips. But in 2015, it announced a six-day trip to the Four Seasons in Bora Bora, and sales surged. Since then, the company’s structured annuity sales have gone from $770 million to nearly $1.2 billion, even as the overall structured annuity market was nearly flat".
However, here are some important points that were not fleshed out, or simply not considered about Pacific Life's increase in production in 2015:
- Pacific Life deftly carved itself a pricing niche. It has nearly always beat everyone on short term cash flows of 1-10 years and often for 15 years. While Pacific Life will not write single deferred lump sums, they will write a two month period certain and be very competitive. That’s the main reason that people use them. With interest rates as low as they were during that time frame, many people opted for shorter fixed term structures. Not long term structures.
- Pacific Life also has competitive medical underwriting for rated ages. This makes them competitive at certain times. Both rated ages and the pricing niche are legitimate reasons to use them.
- The 2013-2014 period in Beaver's article coincides with the nadir of structured settlement IRR’s. The 10 year UST dropped to under 2% in early 2015. With very short term rates that were close to zero it’s not hard to see how Pacific Life (and indeed other insurers) suffered a bit during that time frame.
- In Q2 2014 Pacific Life introduced its innovative Index Linked Annuity Payment Adjustment Rider (ILAPA) and its Private Letter Ruling was published in August 2014. No doubt this impacted 2015 sales. It was and still is the only product of its type, available for qualified structured settlements.
- The bar to qualify for the trips is so high that few brokers qualify.
- Beaver's article suggests that everyone goes to Dubai. Only the top 5 of the 30 that go to Maldives in 2018, go to Dubai (Note: in my communication to him I mistyped 25. Easily verifiable by the same person of interest that provided Beaver with the invitation and industry production data)
On October 9th, I suggested to Beaver that there were far more newsworthy stories such as:
Plaintiff Broker originates factoring deals
Possible Ponzi Scheme Invoving Advanced Funding
Paralyzed Staten Island ferry Victim in legal War w Factoring Companies
AIG Structured Settlement Class Action Dismissed, with prejudice
Fraud on the court by factoring company lawyers
More factoring company shenanigans in Florida
Secondary Market Annuity Annuitants/ made to wait 25 months for their money
Rachel Summit Article/ Annuity FYI
Which brings me to "Rachel Summit". While I appreciate being characterized as a "well respected industry blogger", she, Beaver and a "person of interest" on the periphery of the industry, are grasping at straws. She cites to a December 8, 2015 post of mine as a reference. My opinion hasn’t changed and my point and the target is clear in that post. That post was in response to a single email that was circulated and I questioned the wisdom of the individual who sent the email, without naming them, hoping they'd wise up. But I also opined the life insurer was blameless and that the attendees had to report the value. The trips are not a freebie, it’s a paid vacation where the producer ends up paying the cost via taxes.
Isn't Undisclosed Buying Influence From Trial Lawyers Association is a Much Bigger Problem?
I have plaintiffs who seek out and contact me directly, who ask me why their lawyer is aggressively pushing a particular broker on them.
1.Trial lawyer associations have done tremendous job of soliciting influence and fundraising with structured settlement brokers who in some cases pay more than $100,000 to buy influence.
2. It is well known that a certain East Coast Trial Lawyer Association won’t let any partners in unless it’s at the top contribution level.
3. Several years ago, another state Trial lawyers Association raised its minimum Partnership for Justice Membership to $6,000 from $3,000, yet let anyone from states other than the surrounding states pay the minimum of $3,000. The same TLA used to publish for the public who those contributors were and the level of contributions. Now it's hidden from the public in a password protected area. Where is the transparency?
4. One TLA marketing director literally told me that the money was to "get access" (i.e. buy access).
Rarely are the amounts of these contributions disclosed to plaintiffs and the possibility of influence even discussed. In 2007 I asked the obvious question and received a written opinion from the NY Dept. of Financial Services published September 24, 2007, which said it was unlawful inducement for the purchase of annuities if a life insurance agent or broker were to advertise contributions to an association representing trial lawyers. Yet colleagues of mine in the industry are told “you know how it works”. Included in a 2016 post is a copy of a lawyer pushing his colleagues to use a broker, expressly due to the amount of contribution the firm made in the year that letter was authored by the member of the New York bar and posted on a listserv.
If a lawyer has a fiduciary responsibility to their client, why should how much a broker pays to the TLA, or whether they pay at all, have anything to do with lawyer's or the plaintiff’s selection of the expert? Years ago, one settlement planner after misquoting a case, attempted to cover up the mistake by claiming the rates had changed, then made the outrageous case for continued engagement to a member of the New York bar stating that the lawyer should do business with him anyway because of the money his company gave a large amount of money to the TLA. The lawyer didn't.
If one weighs the scale of undisclosed financial influence, which is the bigger potential problem, if any?
Disclaimer: This author has never taken a Pacific Life trip.