Know the 8 Benefits of Using Structured Settlements to Settle Your Work Comp Claims

Have you ever noticed how a few catastrophic workers’ compensation claims account for a very disproportionate amount of your workers’ compensation cost?

At program renewal time, the dollars spent to settle those few catastrophic claims makes difference between a significant work comp premium increase, or no premium increase, or premium decrease. A structured settlement is one of the most effective tools to use to deal with the cost of high dollar work comp claims. Tort claims use structured settlements all the time since their introduction in the 1970’s, but they were slower to catch on in work comp claims. The work comp community now recognizes the importance of structured settlements and frequently use them to resolve high value claims.

The primary benefit of using a structured settlement is the elimination of the long-term exposure of the catastrophic work comp claim. This is accomplished by the insurer or self-insured company purchasing an annuity from a life insurance company on the employee’s life, guaranteeing the employee an income stream for a specific period of time, or for life — depending on how the structured settlement is crafted.
Plaintiff attorneys recognize most of their clients entire work comp settlement is used up within 3 to 5 years. The conscientious attorney works with the workers’ compensation adjuster and the structured settlement company to protect the employee from possible spendthrift ways.

Plus, in those states where the insurer/self-insured is allowed to pay out the awards on a weekly basis, the structured settlement can be customized to pay a lump sum up front. Thus, the employee receives a small lump sum up front to cover all immediate needs and the plaintiff attorney collects the contingency fee and closes the file.

Potential benefits/selling points to the employee:
1. More money over time than would be received with a lump sum settlement.
2. Guaranteed lifetime payments rather than a designated maximum number of weeks in most state statutes.
3. Flexibility in payments, i.e., payments are customized to meet the individual’s life events, such as a lump sum for college tuition or a new car every ten years.
4. Financial peace of mind. Removes the worry over future income or managing a large amount of money. 5. The ability to provide for a spouse with “joint life” payments, not available under worker comp laws.
Additional benefits to the employer/self-insured or insurer:
6. A complete resolution of the worker comp claim. All future cost are transferred to the life insurance company.
7. A fixed cost for the annuity, eliminating the exposure for continued and/or future medical expenses.
8. The elimination of volatility in the cost of future medical and future increases in the indemnity rate.

Split-Funding
A recent trend in some of the most severe cases is “split funding,” the creation of two structured settlements. One structured settlement funds only the income stream for the employee. The second structured settlement funds the future medical cost eliminating any concerns of the employees about future medical cost, as the life insurance company does the medical cost underwriting and assumes responsibility of the future medical cost.

The best time for the work comp adjuster to start discussing the possibility of a structured settlement is when it becomes obvious the employee will probably never be able to return to work. If the adjuster waits until the plaintiff attorney sends a settlement demand to discuss the benefits of a structured settlement, the employee has probably already been told the lump-sum settlement range the plaintiff attorney’s hopes to receive. By directing the discussion toward a structured settlement early on, the adjuster avoids the employee’s false hopes about a “winning the lottery” type settlement.

Some plaintiff attorneys will want to utilize their selection of a structured settlement company. Such a choice almost always comes up with a higher cost than if you select your own structured settlement broker. If your insurer does not have its own in-house structured settlement broker, it is definitely recommended you work with your work comp adjuster to select your own structured settlement broker.

With your own structured settlement broker, you specify the amount of money you will invest now to eliminate the future cost of the claim. The structured settlement broker is then in a position to customize the structured settlement to meet the employee’s needs and your determination of the settlement value. (workersxzcompxzkit)

While a structured settlement does not settle all catastrophic workers’ comp claims, consider it on all your very large claims as a way to reduce the final cost of the claim to reduce or eliminate future workers’ comp premium increases.

Note: there is a commission involved with buying structured settlement. Make sure you know who is receiving the commission and that is in line with the interests of your company.

Author Robert Elliott, executive vice president, Amaxx Risks Solutions, Inc. has worked successfully for 20 years with many industries to reduce Workers’ Compensation costs, including airlines, health care, manufacturing, printing/publishing, pharmaceuticals, retail, hospitality and manufacturing. He can be contacted at: Robert_Elliott@ReduceYourWorkersComp.com or 860-553-6604.

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