Best's Review


Mission Critical

The structured settlement industry is ripe for digital disruption.
  • Pat Saporito and John Rafferty
  • November 2020
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Today's U.S. structured settlement industry is very concentrated with $6.5 billion in annual premiums written through 12 life insurers and a network of 1,200 brokers. It provides products for two primary types of customers: workers who have suffered serious workplace injuries and filed workers' compensation claims, and individuals or classes of individuals who have been awarded large cash settlements from a tort or class-action lawsuit.

A structured settlement provides a valuable social service by ensuring that claims settlement funds last a seriously injured person through his or her lifetime. One-time cash awards without other life and annuity or other products generally last five years or less. Certainly valuable to society, yet more can be done to provide both a public benefit and increased industry revenue opportunity.

Structured settlement business processes are well-developed, but the technologies used to support them are antiquated.

The drive toward digital transformation is strongly advancing in the nonlife industry but lagging far behind in the life and annuity industries other than in the broad marketing and sales areas. Many life insurers are still reliant on technologies of the 1990s, including client server and desktop applications. For instance, the quoting software used by most life insurers and brokers is written in desktop programming languages developed prior to the internet and cloud-based applications.

The industry needs to innovate and leverage modern technology to help solve inherent shortcomings, including the lack of data standardization and security, application mobility and portability, insight into business quoted versus sold and competitor analysis, and agility in adding new, or enhancing existing products. Other shortcomings include difficulty in integrating applications and architectural fit, and perhaps the most important one, attracting and supporting the next generation of structured settlement sales professionals.

The industry now faces two strong challenges, according to a Deloitte article, “2020 Insurance Outlook: Insurers Adapt to Grow in a Volatile Economy.” One of the challenges is growth. Global life and annuity premiums are forecast to increase only by 2.9% in each of the next two years.

The other challenge facing the industry is talent. Today, the industry is attracting less than 4% of millennials due to its lack of using modern technologies, which is compounded by baby boomers (who comprise one-fourth of the insurance industry workforce) reaching retirement age. This one-two punch presents a perfect storm for other financial services industry players to move into products that can replace structured settlements.

Digital transformation is “mission critical.” The industry must reimagine how a holistic approach that benefits both injured individuals and carriers and aligns and engages all stakeholders based on the claimant's life care plan can generate multiple structured settlement scenarios.

Insurers can begin by using digital technologies to modernize legacy front-end systems and collaboratively and holistically engage all parties, including claimants, carriers, attorneys and others. Big data and artificial intelligence can support dynamic real-time scenario analysis and proposal generation. Such a digital structured settlement solution can provide a foundation for extension into asset under management products that will attract more millennials into the industry.

Life and annuity insurers can make this transition independently or collaboratively. The choice is theirs, but the warning bells have sounded. The question now is whether the industry will continue to own and grow this market or other financial services providers will move in and make these changes.



Pat Saporito is a data and analytics consultant, trainer and author of the book, Applied Insurance Analytics. She can be reached at John Rafferty is president of John Rafferty Consulting, an insurance solution improvement consultancy. He can be reached at

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