W000435
Tuesday, November 20, 2001 12:56 PM
September 11 Victim Compensation Fund of 2001
The purpose of this email is to provide comment and input into rulemaking on this important matter.
Two choices exist for providing funds to victims: Lump sum payments or periodic payments that extend for life.
You're likely aware of the studies that show that lump sum recipients dissipate their awards in five years or less. Usually, these recipients are poor money managers and/or have relatives or other influence peddlers who assist in this dissipation. So, the good intentions of the government to provide financial assistance are thwarted. These recipients will return to their current status in a very short time, and it is likely many will have to be supported by governmental welfare programs.
Contrast this with periodic payment plans (often called structured settlements). Such plans, funded through life insurance companies, offer regular, life-long payments to the claimant. These payments, usually paid monthly, can be adjusted to accommodate changes in need (eg, when dependent children reach age of majority and/or graduate from college), or to reflect anticipated inflation (annual fixed adjustments).
I strongly encourage the government to offer this solution and to fund it through existing life insurance companies. Benefits of this approach include:
1. Financial strengthening of life insurance companies.
2. Infrastructure is in place to process claims and make payments.
3. The industry has hundreds of qualified consultants who might assist in the analysis and processing of claims, including the need to create structures that reflect each claimant's needs.
4. It will eliminate the need for the government to create a large organization to handle claims.
To facilitate the process, the government can solicit the current providers of structured settlements to join a pool for the purpose of speedy implementation. This group would agree on a common earnings rate that would fund the monthly payments. This would allow all major life companies (rated "A" or "A+" by AM Best, numbering approximately 20 such companies) to participate in an equal manner, and could be concluded in very short order with a minimum of time/resource investment.
Current laws and IRS code exist to make all payments from this process tax free. That makes the payments of more value, and potentially lowers the total cost.
Finally, this industry has norms and experience to assist in establishing the value of claims, especially if supported by industry experts who would create formulas for establishing amounts based on facts for each claimant. This group is in the field, in place and is funded through the life companies who would participate in the pool.
In summary, this approach would:
1. Assure lifetime payments to claimants.
2. Provide payment flexibility to meet each claimant's needs.
3. Pour needed money into the life companies, stimulating investment and improved financial health.
4. Utilize existing infrastructure, eliminating cost and time.
5. Allow for speedy implementation.
6. Lower overall cost.
If I can be of further assistance, please contact me at your convenience.
Individual Comment
St. Mary's, KS