Blog Post

Independent Life Structured Settlement Payee Protection

John Darer • Feb 25, 2019

New Program Adds Important Protections, But...

structured settlement payee protection

Independent Life Insurance Company has announced a new structured settlement Payee Protection Policy, which covenants:

  1. Independent Life will not solicit payees for Section 5891 transfers.
  2. Independent Life will copy the planner(s) of record for the original structured settlement or their successors when documents indicative of a 5891 transfer documents are requested by the payee (Benefits Letter, Copy of Policy, Settlement Documents and Beneficiary Changedto Estate).
  3. Independent Life will notify in writing the planner(s)of record for the original structured settlement or their successors when notified of a proposed Section 5891 transfer petition.
  4. When notified of a proposed Section 5891 transfer, Independent Life will review the terms of the proposed transfer and will object to those transfers where: The discount rate used exceeds the Federal Reserve’s Bank Prime Loan Rate plus 5.0%. Independent Life has a record of diminished capacity, a traumatic brain injury (TBI) or other cognitive impairments, and Independent Professional Advice (IPA) has not been provided.The payee is under the age of 25, and Independent Professional Advice (IPA) has not been provided.The jurisdiction of the proposed 5891 transfer does not correspond with the address of the payee (proposed transferor) on file with Independent Life.
  5. At least once a year, Independent Life will publish a report outlining the number of 5891transfer petitions, orders approving and denying, and appeals affecting Independent Life contracts.
  6. Independent Life will reserve the right to appeal any 5891 transfer order that has been granted over its objection.

A Good Start That Sees Independent Life Join and Build on Existing Structured Settlement Industry Leadership
In my opinion this is a good first step on the part of Independent Life Insurance Company, a recent and ambitious entrant to the structured settlement space.I am pleased to see another life insurance company get out in front of the factoring problem.Independent Life's Payee Protection Policy joins and builds on the leadership that Allstate, AIG/American General and Berkshire Hathaway have already started in this area. History has shown that the secondary market has been unable to self regulate. with disastrous results for certain targeted and abused annuitants, often young adults or elderly Blacks, Hispanics and other minorities. some victimized for hundreds of thousands or millions of dollars.

Where the Independent Life Structured Settlement Payee Protection Plan Hurts Its Value Proposition and Could Be Improved
Independent Life has set an excessive "in excess of Prime Plus 5% discount rate" bar for its flagging cases for review. Prime plus 5% is not acceptable. It is a lousy discount rate. There are people who tell you that it's not all about the rate, but it is when you could be talking about millions of dollars, or when you know that JG Wentworth has an incredibly low cost of money (recently was a purported 4%). The Cedric Thomas case, in October 2015, involved a young black man inveigled in a New York to Florida forum shop. shafted in an estimated $1.5 million profit spread to a Florida factoring company. Berkshire Hathaway offers a 6.5% in its Hardship Exchange Program and Allstate offers an 8% discount rate in its Advance Funding Exchange Program. If the value of structured settlement payee protection with Independent Life is to be truly appreciated, then red flags need to go up at a much lower trigger point.

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