by Structured Settlement Watchdog®
Is it permissible for an appointed agent of a structured annuity issuer to compete directly with that company and its other appointed agents using structured settlement receivables of the same or other insurers sourced from the secondary or tertiary market
Generally, in order to sell insurance products to the public you must hold a valid insurance license for the line of insurance* being sold and you must be appointed by the life insurance company issuing the annuity. Appointment is a privilege not a right. Annuity issuers may set certain standards in order to (i) become appointed (ii) remain appointed.
“Recycled structured settlements” are structured settlement payment rights, or receivables acquired from someone who is receiving (hence “receivables”) structured settlement payments as compensation from the settlement of a claim or lawsuit.
Are Structured Settlement Receivables Annuities?
No, Structured Settlement Receivables are not annuities.
Structured settlement receivables (acquired structured settlement payment rights) are not recognized as an annuity or insurance product by the National Association of Insurance Commissioners (see NAIC Statutory Issue Paper No. 160 finalized April 6, 2019). In addition as of August 2023, 40 states had a adopted the 2017 Revisions to the Life & Health Guaranty Association Model Act #520, which expressly excludes acquired structured settlement payment rights, regardless of when acquired.
Salespeople who are purveyors of such structured settlement receivables may not hold any professional licenses that would be legally required of someone who solicits the public for the sale of any insurance product.
Some appointed agents of life insurance companies are selling structured settlement receivables to their customers, directly, or through trusts or limited liability companies. Some of these agents are then competing with the business of structured annuity issuers, even using the annuity issuer’s valuable trademarked brands.
Apparently one company had enough and terminated the appointment of an agent making a business in recycled structured settlements. Now the agent has sued the life insurance company. As soon as I have a copy of the complaint I will share with you more of the details.
Does your financial planner have insurance to cover structured settlement receivables?
Investors working with salespeople attempting to sell them structured settlement receivables who DO possess an insurance license may not have insurance coverage to cover professional malpractice related to the sale of structured settlement receivables to investors, including plaintiffs being sold structured settlement receivables from someone else’s structured settlement by a settlement planner recommended by their attorney and told it was an annuity.
Most professional E&O insurance lists covered products. Professionals who do not know the difference between a receivable and an annuity and presenting such prodcuts as annuities present a potential danger to investors, let alone themselves.
Last updated December 17, 2023
* annuity sales generally come under the life insurance line of business authority.