Actuarial calculations

How to instruct your actuary and read your actuarial calculation - The most important consideration when instructing your actuary is not to simply forward the industrial psychologists report but to give due consideration to the past and future loss of income you want to claim for on behalf of your client.

The most important first step is getting the remuneration correct. A self employed individual would need to provide you with bank statements, tax returns and any info on additional part time income they might earn, last mentioned is very important as this is the first income that goes out the window when plaintiffs are injured. As per self employed individuals see my previous post for some advice in this regard

 

Make sure that you have a list of all benefits that a plaintiff receives from the company if this is not in his employment contract or reflected on his payslip, e.g. a paid lunch, transport or any daily cash allowance. Domestic workers and gardeners are a good example of this. Taxi drivers are a tricky one, make sure you contact the taxi association to determine the name and number of the owner of the taxi so as to enable you to confirm income and terms and conditions as taxi drivers actually pay the owner of the taxi and keep the rest for themselves, as such their income may fluctuate and not be in line with Patterson levels.

 

Make sure to inform the actuary if you want to use a different basis for calculation in terms of promotional prospects or future salary increases as per the industrial psychologists report. Even without an IP report you can adequately brief a actuary in an MVA matter but briefing an actuary in a medical negligence claim would require the quantification of all hospital and medical expenses and for that you will need to present the actuary with ALL your expert reports so as to allow him to do a schedule to the calculations.

 

Remember to tell your actuary which contingencies you would like him to apply and please consider these carefully and discuss them with your counsel as they can add or subtract to your calculation exponentially. If you are appearing for the defendant make sure you do not double discount. Look at employability versus a large contingency deduction and see which option would be the best.

 

Advise your actuary on any accelerated benefits received and/or disability benefits and remember not to include sympathetic employment as an income. Read your case law about this.

 

How do you read a calculation? First off you need to check that the info you provided the actuary with is in actual fact correct i.e. is all the factual information used by the actuary correct as provided by you.

 

Check the inflation rates and the discount rates used by the actuary and see if you are happy with them or if they differ substantially from the other sides calculation and ask why those were used. Make sure you are satisfied with the life tables used and that you find them applicable to your client as these may be very important not so much in MVA matters as in Med Neg matters where benefits are lifelong.

 

The calculation would be divided into various columns and tables. One for past loss before and after accident and up to date of trial. Then one for prospective earnings before and after accident. It is often referred to in case law as the "now then" and "but for" scenarios. Contingencies in these two scenarios differ markedly and you should know the difference between the two. Contingencies on the past loss should also differ on the but for and now that scenarios and should not be a globular deduction.

 

Contingencies can be deducted at the end of the matter as a lump sum but make sure you take the amount pre-contingencies on your calculation otherwise you will double discount the plaintiff. Again make sure that the discount is fair and reasonable taking into consideration all the relevant case law.

 

Actuarial calculations are not complicated but very important, don't ignore them and learn to use them in your favour.