Justice Committee reinforces IFoA calls for clarity on discount rate

The Justice Select Committee has published its report concluding its pre-legislative scrutiny of the draft personal injury discount rate. Marjorie Ngwenya, President at the Institute and Faculty of Actuaries said:

“We welcome this report and the Committee’s request for clarification on what is meant by 100% compensation. As stated in our consultation response, such compensation will rarely be precisely achieved in practice. We are especially pleased to see this report identifying the risk of claimants exhausting funds due to living longer than expected.

“The IFoA has set out its belief that in many cases, Periodic Payment Orders (PPOs) provide the least risky option for claimants. While we accept that PPOs are inappropriate for some claimants, the low take up does suggest that claimants are accepting too much risk without understanding the potential that they could exhaust all their assets.

“We support the Committee’s request for further investigation into whether the discount rate should reflect actual investment. The IFoA has consistently argued that compensation should be independent of future investment behaviour. We would like to see any investigation into investment practices concluded as soon as possible to remove uncertainty for both claimants and insurers.

“We also support the Committee's recommendation that the Government should find the means to assess whether claimants are compensated fairly once the legislative framework is in place.”

~ENDS~

Editorial notes:

About the Institute and Faculty of Actuaries

The Institute and Faculty of Actuaries (IFoA) is a royal chartered, not-for-profit, professional body.

Research undertaken by the IFoA is not commercial.  As a learned society, research helps us to fulfil our royal charter requirements to further actuarial science and serve the public interest. 

Actuaries provide commercial, financial and prudential advice on the management of a business’s assets and liabilities, especially where long term management and planning are critical to the success of any business venture. They also advise individuals, and advise on social and public interest issues.

Members of the IFoA have a statutory role in the supervision of pension funds and life insurance companies. They also have a statutory role to provide actuarial opinions for managing agents at Lloyd’s.

Members are governed by the Institute and Faculty of Actuaries. A rigorous examination system is supported by a programme of continuing professional development and a professional code of conduct supports high standards reflecting the significant role of actuaries in society.

The IFoA is available to provide independent expert comment to the media on a range of actuarial- related issues, including enterprise risk management, finance and investment, general insurance, health and care, life assurance, mortality, and pensions.