The Impact of COVID-19 on the Structured Settlement Market

The Impact of COVID-19 on the Structured Settlement Market

How has the Impact of COVID-19 pandemic impacted the structured settlement market to date and what impact will it have in the future?

Upchurch was quoted prominently in an article titled “Annuity-Funded Structured Settlements Are Slowed by Legal Logjam” written by Warren S. Hersch and published June 8, 2020 at Life Annuity Specialist, a subscription-only online resource. Upchurch estimated “[t]he number of cases that courts are hearing for the annuity-funded payouts is down by about 35% to 45%.”

Life Annuity Specialist  references a recent article published by S&P Global Market Intelligence which ranks Independent Life as “the second-fastest growing U.S. life insurer last year. Direct premiums from annuities totaled nearly $67.5 million, a more than 400% increase from 2018.”

Upchurch added: Independent Life “continues to expect an increase in annuity [premium] of between 25% to 40% for all of 2020 as activity picks up later in the summer but that would be well short of last year’s expansion and the 272% increase in the first quarter.”

The Life Annuity Specialist article features observations and opinions from several additional industry leaders and participants including Independent Life agents Mark Wahlstrom and John Darer.

Society of Settlement Planners (SSP) Virtual Mediation Webinar

Bua was part of a panel consisting of settlement planning experts and mediators who participated in a webinar discussing “The Virtual Mediation.” Hosted by the Society of Settlement Planners (SSP) on June 4, 2020, the webinar is now available for public viewing on the SSP website.

Skillfully moderated by Paul Isaac, Jr., the webinar presenters included mediators Scott Baughn (Florida), Dan Cavarello (New York), Jeff Kitcheven (California), Settlement Planners Joseph Destralo and Anthony Prieto as well as Bua representing life companies and addressed their topic in terms of both personal experience and a predicted increase in use of virtual mediations as a result of COVID-19.

Although structured settlements were only specifically discussed briefly by Bua and Prieto, the entire webinar provided valuable insights about the future – not only the future virtual mediations but also how COVID-19 and virtual mediations are changing the structured settlement market. Here are summary notes with some key takeaways:

Impact of COVID-19

Multiple webinar panelists pointed out COVID-19 has postponed trials and how it is difficult to motivate defendants if there is no trial date. In addition, many self-insured defendants now face unique financial pressures and have higher priorities for their money. One of the panelists predicted it would be a long time before in-person mediations resume. Another panelist predicted mediations generally will increase toward year end.

The panelists disagreed on whether COVID-19 itself has impacted the valuation of cases. One of the mediators observed that, as a result of the pandemic, doctors and nurses are now viewed as heroes which could lower verdicts and settlements in malpractice cases. Another mediator observed that court delays have definitely lowered settlement values saying “a nickel beats a slow dime.” He nonetheless viewed defendant economic problems as an opportunity for settlement planners to “re-engage” with plaintiff attorneys.

Viral Mediation – Impact and Issues

At least one of the panelists cautioned it is still early to generalize about viral mediation. However, most panelists agreed that case values have not changed as a result of them. Another panelist pointed out that technology problems can occur but also stated that the technology has improved significantly during the past couple of months. Although the technology can be intimidating at first, he said once you experience virtual mediations they quickly become user friendly.

Multiple panelists emphasized the importance of both breakout rooms and backchannel communications. For settlement planners, it can be difficult to have a one on one client meeting with 10 other people participating in a virtual mediation. Virtual mediations require more preparation with plaintiff attorneys. Opening sessions for plaintiffs are more like a “Day in the Life” presentation.

Virtual Mediation – Advantages and Disadvantages

Most of the mediator panelists appeared to favor virtual mediations. One stated that in-person mediation had deteriorated and that virtual mediations offered an opportunity for a “rebirth.” Part of the reason, he said, is that virtual mediations put the attorneys front and center. They play a more active role with fewer distractions. Everyone agreed that virtual mediations are more relaxed and most said less emotional. No one has to rush and catch a plane. Participants are more willing to work late and the “money person” no longer has an excuse not to be present.

The most common criticism from settlement planners is the lack of personal contact with the plaintiff. Virtual mediations also make it difficult or impossible to read body language and non-verbal cues. Although lunches during in-person mediations provide a valuable, often strategic, break, “Zoom fatigue” can also sometimes actually help a mediator achieve a settlement.

Overall, the SSP “Virtual Mediation” webinar and Life Annuity Specialist structured settlement article provide timely and complementary analyses for structured settlement and settlement planning professionals who are developing new business strategies and business models to continue expanding their business in the post COVID-19 era.