The National Association of Independent Insurers applauded Ohio Governor Bob Taft for signing the structured settlement law at a ceremony Thursday.
NAII Counsel Robert Hurns, who attended Thursday’s ceremony, called the event a victory for Ohio consumers.
“This law will serve to educate and protect consumers so that when they choose to sell their settlements for a lump sum, they are not signing away their financial security,” Hurns said.
NAII strongly supported the legislation, Senate Bill 260, because it calls for several layers of consumer protections before structured settlements can be sold to factoring companies.
“Consumers may not know all the facts when they enter into these agreements with ‘factoring companies’ who buy settlement rights from individuals,” said Hurns. “Unfortunately, what it often amounts to is a predatory practice that lures consumers into selling their financial security for pennies on the dollar.”
Under structured settlements, such as a workers’ compensation award, claimants receive funds over time rather than in one lump sum. The goal is to provide long-term financial security, especially in cases where the claimant has suffered permanent injury and cannot return to work.
Factoring companies pay a lump sum cash amount for part or all of the remaining payments in a settlement, often for considerably less than full value.
The new law provides protections in three key areas by requiring: Full disclosure of all fees, charges, and other amounts deducted from he sale of a structured settlement. Full disclosure of discount rates and a notice of transfer to all interested parties, including the insurance company. · Review and approval of each sale by court or other administrative authority to assess whether the consumer will experience financial hardship in the future. NAII, based in suburban Chicago, is the nation’s largest full-service property-casualty insurance association, with more than 650 member companies that write more than 33 percent of the total property/casualty insurance in the country and 23 percent in Ohio.
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