AIA Calls Upon Massachusetts Committee
This bill would protect recipients of long-term structured settlements from aggressive marketing by factoring companies seeking to persuade them to cash out future payments at sharp discounts. Structured settlements are a well-recognized means of compensating victims of serious, often disabling, physical injuries. Under a structured settlement, the parties reach a negotiated agreement under which the injured person receives compensation in the form of a stream of payments, tailored to that person's future needs. The future payments are tax-free and are funded through an annuity contract or U.S. Treasury obligations.
Structured settlements provide long-term financial protection for injury victims and their families. They provide against the loss or dissipation of lump sum recoveries. Factoring companies, commonly using phone banks, advertising and high-pressure sales to "buy" the settlement for a small lump-sum payment, undermine these benefits and may exploit an injured person at a time when they need cash.
"This bill will protect people who may be pressured to "sell" the benefits of a long-term structured settlement at a time when they are vulnerable," said James T. Harrington, AIA vice president, northeast region. "Many people who enter into these factoring transactions regret it when they realize how much they have given up for a small lump sum payment."
The bill contains one amendment from the original legislation drafted by AIA. One criterion for court of approval of a transfer has been changed from proof of hardship on the part of the seller, to a court's finding that the sale is in the seller's best interest. AIA agreed to the amendment. Other criteria for court approval are: the transfer will not violate other applicable laws (such as state laws prohibiting the assignment of a workers' compensation settlement); the key economic terms of the proposed transfer have been disclosed to the settlement recipient; the settlement recipient has received independent professional advice concerning the transfer.
AIA is leading the effort to pass similar legislation in several states. In the Northeast, Connecticut, Maine and New Hampshire have already enacted similar legislation. Similar bills are under consideration in New York and Rhode Island.
The American Insurance Association is a trade organization representing more than 370 major insurance companies that provide all lines of property-casualty insurance. The association is headquartered in Washington, D.C. and maintains an Albany regional office. AIA press releases are available at www.aiadc.org.
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