by John Darer CLU ChFC MSSC CeFT RSP CLTC
Reviving an issue that I first raised in March 2020, concerning the Attorney Fee Deferral (Fee Master) advertising campaign, Buffalo's Milestone Consulting continues to take creative liberty by how it advertises permanent whole life insurance as an attorney fee deferral option, now encouraging attorneys to be Fee Framers vs Fee Masters.
Here is what Milestone fee frames on their website at the time of posting:
"Option Two: Permanent Whole Life Insurance
Keep more of your total contingency fee and work within an existing financial framework that can return historical dividends as
high as six percent or greater. By becoming a policy holder in one of these large mutuals, you reap the benefits of their financial strength and dividend-paying histories".
" As high as 6% or greater" is believed to refer to the Dividend Interest Rate of Massachusetts Mutual Life
Some thoughts for readers to consider in balancing the truth versus intellectual flim flam:
On Nov. 1, 2021 – Massachusetts Mutual Life Insurance Company (MassMutual) announced in a widely available press release, that its Board of Directors has approved an estimated 2022 dividend payout of nearly $1.85 billion – the highest payout in the company’s 170-year history.
“In a rapidly changing world that continues to be filled with doubt and uncertainty, there are few things that people can count on from one day to the next,” said MassMutual Chairman, President and CEO Roger Crandall. “For our policyowners, one of them is MassMutual’s enduring commitment to their financial security and well-being. Our record dividend payout for 2022 reflects that pledge, as well as our ability to weather short-term challenges to deliver long-term value.” Ibid.
"While dividends are not guaranteed, MassMutual has paid them to eligible participating policyowners every year since 1869. The estimated 2022 payout reflects a sustained 6.00% dividend interest rate1, demonstrating MassMutual’s long-term commitment to providing a competitive dividend while enhancing the company’s financial strength, with total adjusted capital reaching an all-time high of more than $31 billion". MassMutual Press Release Ibid.
Pay attention to footnote 1 which I pointed out in 2020 as I do now, expressly states
"The dividend and dividend interest rate (DIR) are determined annually, subject to change and are not guaranteed. Dividends for eligible participating life insurance policies primarily consist of investment, mortality and expense components. The DIR is used to determine the investment component of the dividend. It is not the rate of return on the policy and should not be the sole basis for comparing insurers or policy performance". Ibid.
While the total dividends paid to all of its eligible policyholders is the highest paid in its 170-year history, the fact is that Mass Mutual's dividend interest rate has been in decline for two decades. In 2002 it was 8.05%. Source: TopWholelIfe.com Whole Life Dividend History
That doesn't make whole life a bad product for those with a permanent insurance need, but it underscores the lack of credibility in this aspect of MIlestone's advertising to would be attorney Fee Framers.
The key takeaway is that the dividend interest rate is NOT the rate of return on the policy.
So how do you benefit from a dividend history that has been in decline for 2 decades? Milestone claimed you do in 2020 in its Fee Master brochure. Do you really "benefit from a dividend history, in the future? How as Milestone fee frames in 2022 do you benefit from a dividend history in the future without being "Biff Tannen" in possession of AM Best Historical dividend reports, being prepared to "alter the space time continuum", and having the prerequisite 1.21 Gigawatts at your disposal?
Fee Frame Option 3 sees Milestone hanging on to the inaccurate and misleading term "Secondary Market Annuities" in marketing attorney fee deferrals to lawyers and law firms. Why would Milestone Consulting continue to attempt to legitimize an illegitimate term like secondary market annuity?
- Factored structured settlement payment streams (acquired structured settlement payment rights) are not annuities or insurance products. Who says so? The National Association of Insurance Commissioners in Statutory Issue Paper No. 160, finalized April 6, 2019.
New York Department of Financial Services says "an annuity is a contract between a purchaser and an insurance company in which the purchaser agrees to make a lump sum payment or series of payments in return for regular disbursements, beginning either immediately (within 12 months) or at some future date". When you buy structured settlement payment rights from Milestone, or anyone like them you are buying a receivable not an annuity contract. You are not paying consideration to an insurance company.
- The 37 States that have adopted the 2017 revisions to the Life & Health Guaranty Association Model Act (#520) do not consider investors in structured settlement payment rights (what is being falsely marketed as an annuity) as eligible for insolvency protection that may be available pursuant to those acts. As each state adopts the Model Act, there is a retroactive application of the insolvency provision affecting investors, which provides no coverage for investors in those states.
"An annuity is a contract between you and an insurance company in which the company promises to make periodic payments to you, starting immediately or at some future time. You buy an annuity either with a single payment or a series of payments called premiums.
"An annuity is a contract between you and an insurance company that requires the insurer to make payments to you, either immediately or in the future. You buy an annuity by making either a single payment or a series of payments. Similarly, your payout may come either as one lump-sum payment or as a series of payments over time".
- Furthermore, as of March 11, 2022, 34 states have adopted the 2017 Revisions to the Life Health Guaranty Association Model Act #520, which expressly excludes acquired structured settlement payment rights in any insolvency. The exclusion applies retroactively. In other words, if you acquired the rights from Milestone, or any related company, or any other unrelated company that has mischaracterized your purchase of factored structured settlement payments as an annuity you could be S.O.L. And Errors & Omissions coverage typically excludes insolvencies. It doesn't matter if you bought 'em through a Master QSF, a firm wide QSF or single case QSF!
- Two more states have the 2017 revisions #520 under consideration (RI and WA) and the NAIC is encouraging the remaining states to adopt the 2017 Revisions.
"...all historians acknowledge that History is more than just learned knowledge about the past. History empowers you to understand the contradictions and delights of our contemporary world as products of longer processes with origins in past decades and centuries, sometimes even in past millennia Source: Harvard University
Last updated November 26, 2022