Sedgwick Answers QuestionsAbout Structured SettlementsSedgwick Copyright © 2011 The information contained herein is confidential and proprietary to Sedgwick. It is being provided in order to allow evaluation of Sedgwick’s services and capabilities. Nothing contained hereinshould be disclosed to a third party without the prior consent of Sedgwick. Brokerage services provided by Sedgwick companies: Galaher Settlements and Insurance Services, Inc. and Selective Settlements, Inc.

questions about structured settlementsstructured settlements

Structured settlements have been bringinginsurers and employers a better way to handlehigh-cost claims settlements for decades. Astructured settlement provides the injuredparty with steady and predictable tax-freeincome over time rather than a lump sumpayment. Structures are designed to encourageexpeditious settlement and minimize the costsinvolved in personal injury, wrongful death andworkers’ compensation claims.But creating the right approach to structured settlements

isn’t always easy. Claimants don’t understand how theywork; some attorneys may fight such proposals; andinsurers and employers often believe that perhaps justsettling and paying the lump sum may be the simplestapproach. It’s not.By involving our specialists in the settlement process,innovative options to meeting the future financial needs ofthe injured party can be presented at a reasonable cost. Whencreated by experienced experts, there are also significantsavings – and long-term liability benefits – for payers.But...there is both an art and a science to structuredsettlements. So if you’ve got questions, we’ve got answers.Why select Sedgwick’s structured settlement services?As one of the largest providers of structured settlements,Sedgwick offers clients a coordinated approach tostructured settlements. We have a staff of more than50 seasoned professionals with more than 600 years ofcombined experience. Our team has successfully closedmore than 50,000 structured settlements over the past30 years. In 2010 alone, our structure sales representedmore than $1 billion in benefits to injured annuitants. Thisachievement gives us one of the most extensive dedicatedsettlement databases in the industry – and brings ourclients unparalleled insights into the strategies that createoptimal results.Sedgwick Copyright © 2011 The information contained herein is confidential and proprietary to Sedgwick. It is being provided in order to allow evaluation of Sedgwick’s services and capabilities. Nothing contained hereinshould be disclosed to a third party without the prior consent of Sedgwick. Brokerage services provided by Sedgwick companies: Galaher Settlements and Insurance Services, Inc. and Selective Settlements, Inc.

questions about structured settlementsstructured settlements / p. 2We offer a full range of settlement solutions, including:• Convenient, cost-effective single-source integratedclaims solutions• A full suite of powerful claim settlement tools• Unique expertise in consultative approaches toresolving claims• Local jurisdictional insights and knowledge through ournational presence• A wide range of settlement options• Integrated claims solution strategies to lower costs andenhance administrative efficienciesIn addition, the Sedgwick team is available to assistin post-settlement services. We review all settlementagreements and work with attorneys to ensure theappropriate structured settlement language is includedin the documents to guarantee tax-free status of thesettlements. If needed, we prepare documents for ourclients, saving internal staff time and giving a worldclass,single-source resource for all settlement needs. Ourstrong relationships with leading life insurers enable usto facilitate the completion of all paperwork so benefitpayments can begin promptly.Plus, we aid in the administration of files by updatingaddress changes, addressing any problems with paymentsand handling all inquiries, adjustments and questions thatmay occur.There are many companies providing structured

settlements today. What makes Sedgwick’s settlementsdifferent?There’s more than just one product, service or area thatsets us apart, including our technology, knowledge ofother settlement services such as MSAs, experienced teamand overall strategic approach. Other factors that make usunique include:• Experience – We have participated in thousands ofstructured settlements for personal injury, wrongfuldeath, medical malpractice, workers’ compensation,Jones Act and Longshore, FELA, environmental,condemnation and divorce cases. And in this industry,experience matters. You want a team that has depthof experience and specific jurisdictional knowledgeto provide the guidance needed to create a successfulsettlement.• Local knowledge – Our experts are located coast-tocoast,giving us important contacts and knowledgeabout local jurisdictions and resources. This collectiveknowledge helps us identify the right resources,collaborate with local attorneys and settle claims quickly.• A focus on the “end game” – Our job is not toincorporate a structured settlement into every claim,it’s to ensure every one of our clients’ claims is settledquickly, is in compliance with all state and federal laws,is fair to all parties and that it ultimately reduces costs.With this in mind, we provide our structured settlementservices at no cost to our clients.What is the value of an integrated approach to structuredsettlements vs. unbundling through a specialty vendor?Each of our services is designed to provide cost-effective,quality-based solutions to further the ultimate goal inclaims adjudication – managing the overall cost of theclaim and the speed of resolution.• We are the leading company offering this level ofcomprehensive service and integration in our approachto settling claims.• We strive to be proactive and to identify only thoseSedgwick Copyright © 2011 The information contained herein is confidential and proprietary to Sedgwick. It is being provided in order to allow evaluation of Sedgwick’s services and capabilities. Nothing contained hereinshould be disclosed to a third party without the prior consent of Sedgwick. Brokerage services provided by Sedgwick companies: Galaher Settlements and Insurance Services, Inc. and Selective Settlements, Inc.

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claims that could most benefit from a structuredsettlement.• We have the tools and historical database needed toanalyze loss evaluation. We can analyze damages andproject into the future to establish reserves.These insights help us ensure that clients get the bestpossible resolution to settling claims.How do structured settlements impact Medicare set-asideaccounts (MSA s)?Using structured settlements as a tool in the funding ofMedicare set-aside accounts is a key strategy for costcontainment. The Sedgwick Medicare compliance modeloffers a fully integrated settlement approach.Our structured settlement and MSA teams work together

to determine when it is cost-effective to fund an MSA witha structured settlement, and proactively work to furtherreduce funding costs through the use of rated ages whileensuring strict adherence to all Centers for Medicare andMedicaid Services (CMS) guidelines and the avoidance ofpenalties and fines.What makes Sedgwick’s settlement technology unique?The Settlement Processing Information Network (SPIN) isour structured settlement diary-based file managementsystem. It offers integrated modules to facilitatedocument creation, review and storage, accountingfunctions, quoting, license administration and more forcomprehensive management of our clients’ cases.This system also allows us to:• Accurately track case history and progress• Compile statistical data and generate reports• Stay organized and focused to resolve cases quickly andefficientlyThe quoting module allows us to quickly interface withvarious life companies to provide competitive up-tothe-minute structured settlement quotes in as little asone hour. Our diary system allows us to easily track caseprogress, generate follow-up contacts and facilitate a finalsettlement.SPIN also incorporates a data processing function throughwhich we can create customized reports to meet yourspecific case tracking needs, keeping you up-to-date on allreferrals, sources of those referrals and overall case status.Once a case is settled, we are able to provide turnaroundof settlement documents and efficiently coordinate theirprogress through final execution and contract issuance –often within the same day.How does the typical settlement process work?Once a claim has been identified as a potential candidatefor a “structure,” we urge our clients to bring us into thecase at the earliest opportunity. Our staff consultants areexperienced professionals who can provide innovativesettlement options to facilitate the negotiation process.At no cost to our clients, we provide on-site consultation,attend settlement conferences, generate proposals andinvestment comparisons, assist with setup for medicaltrusts, and answer questions about the financial securityof insurance companies. Our services extend through theduration of the negotiations and we are able to revise andcreate new plans as necessary.What are the benefits of a structured settlement toinsurers and self-insureds?A structured settlement utilizing a reduced life expectancy,or rated age, can offer the insurer or self-insured asignificantly reduced cost for providing the claimant anequitable, yet secure, lifetime income stream. This is trueeven when the cause of the reduced life expectancy isSedgwick Copyright © 2011 The information contained herein is confidential and proprietary to Sedgwick. It is being provided in order to allow evaluation of Sedgwick’s services and capabilities. Nothing contained hereinshould be disclosed to a third party without the prior consent of Sedgwick. Brokerage services provided by Sedgwick companies: Galaher Settlements and Insurance Services, Inc. and Selective Settlements, Inc.

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unrelated to the incident that gave rise to the claim. We willcarefully review each claim to ensure the most favorablerated age and pricing with the most competitive annuityrates from the highest-quality life insurance companies.Here’s where both art and science come into play.Negotiations should center on the injured party’s needsassessment rather than the cost of the structuredsettlement package. This helps to focus attention on thearray of settlement possibilities and away from subjectivecash demands and offers. Seasoned negotiators find thatoffering a settlement package that includes a structureimproves their chances of settling a claim, even if thestructure itself is ultimately rejected.How do you work with internal claims departments?We believe one of our primary jobs is to bring efficienciesto internal claims programs so they can focus on otherpriorities. We offer a centralized claims intake area thatallows us to better collaborate and coordinate with claimsexaminers and brokers. Examiners can access our websitefor initial intake, to create reports, track claims and setreserves. Our database has the capability to provide anysettlement information clients need. Insights into theprogress of settlements are always just a click away.How much money can a structured settlement save?That depends on a wide range of factors. Overall, we havefound that structured settlements can save a significantpercent over the actual lifetime of the claim.What about your team’s experience?We have more than 50 experienced and credentialedsettlement brokers delivering the expertise needed to helpour clients quickly and accurately settle claims.Where are you located?Now that Selective Settlements and Galaher Settlementsare part of Sedgwick, the industry leader in claims andproductivity management, we have the broadest coveragearea in the nation with settlement brokers in virtuallyevery major U.S. city.What type of companies do you use to underwritesettlements?As one of the leading structured settlement companies inthe country, we only use the highest-rated life insuranceunderwriters in the US. Additionally, we receive monthlyratings reports to continually track the strength ofour underwriters. This best practice ensures that oursettlements are more readily accepted by the courts andalso provides our clients long-term liquidity assurances.Sedgwick settlement service – secure, savvy, synergisticsolutions• Integrated approach that focuses solely on helping ourclients develop optimal claims settlement strategies• Coast-to-coast jurisdictional knowledge and insights• Single point of contact for our clients, creating ease ofadministration and cost efficiencies• The most comprehensive claims database in the nation,giving us important insights and historical data tosettle claims quickly and accurately

• Instant access to in-depth online reporting and statusContact the Sedgwick Structured Settlement team for moreinformation on our settlement services.800-774-4705structures@sedgwickcms.comwww.sedgwickcms.comSedgwick Copyright © 2011 The information contained herein is confidential and proprietary to Sedgwick. It is being provided in order to allow evaluation of Sedgwick’s services and capabilities. Nothing contained hereinshould be disclosed to a third party without the prior consent of Sedgwick. Brokerage services provided by Sedgwick companies: Galaher Settlements and Insurance Services, Inc. and Selective Settlements, Inc.

Structured Settlement Illustration: Example 1structured settlements / p. 5Scenario:The claimant was injured in an automobile accident. The following payment stream was set up to provide supplementalincome for work loss and payments for future knee surgeries and physical therapy. In addition, money was allocated toprovide a large lump sum payment for retirement.Proposed benefits• $100,000 Cash payment at settlement, inclusive of attorney fees and immediate cash needs to claimant• $500 Payable monthly, guaranteed for 20 years, beginning one month from purchase date• $15,000 Guaranteed lump sum payment at age 21• $20,000 Guaranteed lump sum payment at age 25• $25,000 Guaranteed lump sum payment at age 30• $35,000 Guaranteed lump sum payment at age 35• $50,000 Guaranteed lump sum payment at age 40• $75,000 Guaranteed lump sum payment at age 45• $100,000 Guaranteed lump sum payment at age 50• $115,000 Guaranteed lump sum payment at age 55Tax-free guaranteed benefits: $655,000Total cost including cash: $302,993Sedgwick Copyright © 2011 The information contained herein is confidential and proprietary to Sedgwick. It is being provided in order to allow evaluation of Sedgwick’s services and capabilities. Nothing contained hereinshould be disclosed to a third party without the prior consent of Sedgwick. Brokerage services provided by Sedgwick companies: Galaher Settlements and Insurance Services, Inc. and Selective Settlements, Inc.

Structured Settlement Illustration: Example 2structured settlements / p. 6Scenario:The claimant was injured at a community swimming pool. The accident left him with severe brain damage and partialparalysis. These benefits provide him with payments for lifetime medical support, including an assisted living programand physical therapy.FOR: a male claimantAGE: 35RATED AGE: 54Proposed benefits• $150,000 Cash payment at settlement, inclusive of attorney fees and immediate cash needs to claimant• $1,500 Payable monthly, guaranteed for 20 years and life thereafter, compounding at 3% annually,beginning one month from purchase dateTax-free guaranteed benefits: $633,667Tax-free life expected benefits: $1,752,871Total cost including cash: $585,427Sedgwick Copyright © 2011 The information contained herein is confidential and proprietary to Sedgwick. It is being provided in order to allow evaluation of Sedgwick’s services and capabilities. Nothing contained hereinshould be disclosed to a third party without the prior consent of Sedgwick. Brokerage services provided by Sedgwick companies: Galaher Settlements and Insurance Services, Inc. and Selective Settlements, Inc.

Structured Settlement Illustration: Example 3structured settlements / p. 7Scenario:

The claimants are the widow and children of a man fatally injured by contact with a power line. The original award wasfor $4 million. During the appeal process, this structure was offered and accepted. The structure provided supplementalfinancial security for the family and ensured educational funds for the children.Proposed benefits• $ 300,000 Cash payment at settlement, inclusive of attorney fees and immediate cash needs to claimant• For Claimant’s Wife (Age 42): Income Supplement$ 2,500 Payable monthly, guaranteed for 30 years, beginning one month from purchase date• For Son (Age 5): College Fund$ 20,000 Payable annually, guaranteed for 4 years, beginning at age 18• For Daughter (Age 2): College Fund$ 20,000 Payable annually, guaranteed for 4 years, beginning at age 18Tax-free guaranteed benefits: $1,887,262Total cost including cash: $1,044,22712-11