by John Darer® CLU ChFC MSSC CeFT RSP CLTC
First, make sure that you are speaking to a true structured settlement broker, expert or consultant and not a factoring company or cash flow company representative masquerading under any of these terms.
Most state insurance departments in the United States have consumer protection regulations which require actuaries at insurance companies to certify that each liability has an asset to match it on an annual basis. Therefore, the insurance companies issuing structured settlement annuities must be careful in rate setting to assure that they have a balance of assets to meet their obligations. Should it take on too much premium and the corresponding liability, without assets to match, an insurance company could find itself in hot water with the regulators.
What are the types of structured settlement quotes?
On a very basic level there are several types of quotes: Book Rates, Daily Rates and either of the two with a Rated Age or special impaired risk pricing .
Book rates are the published rates of the structured settlement annuity issuer. The "book" refers to the fact that in the pre-computer era, rates literally came from a rate book or rate sheet. Today most companies make such rates are available for download online to its appointed agents/brokers so that your structured settlement broker, expert, consultant or settlement planner should have in his/her office or installed on his/her note book computer. Book rates change periodically. Generally book rates are good for a certain number of days
Daily rates, as you might assume, are generally good "for the day of quote only", a " blue plate special". Given that bond markets fluctuate daily there may be bonds out there on a particular day that will permit the annuity issuer to issue a more aggressive rate. In part because of the asset/liability matching requirement most annuity issuers require daily rate pricing on very large cases (definition of "very large" varies by company). Note that some structured settlement annuity issuers will hold daily rate pricing for 24 hours.
Rated age pricing applies to book rates or daily rates. A rated age affects the cost of any life contingent structured settlement annuity benefit. Rated ages are opinions based on medical information concerning the annuitant that causes the underwriter to believe that the plaintiff or annuitant has a shorter than normal life expectancy. Based on this opinion the annuity issuer is wiling to issue the annuity at a lower cost/higher yield an absorb the mortality risk. A rated age can either reduce of the cost of providing a known life contingent benefit or it can boost the yield per claim dollar if buying a life contingent benefit and the contribution is known. Rated ages vary by annuity issuer and the effect of the rated age on the pricing of the annuity will vary by company and even by the type of benefit desired. If you are seeking a benefit that is for a certain period of years or is a guaranteed lump sum payment then the rated age has no effect on the cost of the structured settlement.
Different structured settlement annuity issuers specialize in different types of cash flows. Some may be better short term. Some may be better long term. Some may specialize in lump sums. Others may be more competitive at older ages or with deferred start dates. It seems complex but a good structured settlement broker, expert, or consultant should be skilled at weaving the best plan/offer together for you or your client. Such plan/offer may involve one or more structured settlement annuity issuers.
Most structured settlement brokers today have the ability to send you structured settlement quotes via email for speed, ease of storage and re-transmission (to clients or other advisers) and reduce your paper clutter.
One thing to note is that a quote to "sell your structured settlement annuity payments rights" is NOT a "structured settlement quote". To clear up the confusion (created by factoring company Internet advertising) it is a "factoring quote".
Updated July 1, 2023