ATE insurance. Presentation to the Bristol Actuarial Society. 15 March Geoff Watts. ATE insurance Slide 1

Transcription

1 ATE insurance Presentation to the Bristol Actuarial Society 15 March 2018 Geoff Watts ATE insurance Slide 1

2 Content Part A ATE insurance ATE description Legal milestones Basic actuarial features Key risks Comparison with term assurance Part B Your views is ATE in the public interest? Some points to consider Discussion Notes Presentation is.. Not insurance company specific For actuaries not lawyers Very broad brush England and Wales only ATE insurance Slide 2

3 Description Legal expenses insurance Taken out After The Event - eg a personal injury Underpins a No win No fee legal action In a legal action the loser pays winner s costs ATE policy covers the risk you lose and liable for costs Claim Management Company puts you in touch with a solicitor Solicitor handles the ATE application ATE insurance company provides the policy No win claim on your ATE policy ATE insurance Slide 3

4 Legal milestones 1995 Conditional Fee Arrangements allowed - No win - No fee introduced 1999 limit on legal aid for civil cases alternative funding arrangements needed (eg ATE insurance) 2013 limit on the ATE premium a winning claimant can recover - new generation of ATE insurance ATE insurance examples Personal injury Industrial disease Holiday illness Medical negligence See websites for numerous other types ATE insurance Slide 4

5 Basic actuarial features Underwriting Actuaries are relatively little involved in ATE insurance Little on IFoA website/library Claims Premiums Expenses Assets and reserving Key risks ATE insurance Slide 5

6 Underwriting Simple application forms Acceptance = prospects of success of 51% or more Some insurers get involved in underwriting Other insurers delegate underwriting to solicitor 51% depends on policy and solicitor could be 60%, 70% or higher ATE insurance Slide 6

7 Claims Claim paid if the legal action lost Fewer claims and fewer declined if the insurer is involved in underwriting?. Amount payable = own and defendant s costs (depends on policy cover) Policy limit on maximum amount payable Premium waived if claim paid ATE insurance Slide 7

8 Premiums Single premium deferred to end Win premium payable Lose premium waived Premium amount may differ for each legal stage Insurance premium tax applies P = C N Where P = stage pure premium C = expected total claim amount at that stage N = expected number winning policyholders at that stage ATE insurance Slide 8

9 Expenses Normal expense types initial set-up and ongoing Claim declined if action never had prospects of success? Solicitor involved so declinatures challenged? Claim expenses o Normal cost of handling/investigating a claim o Extra cost if solicitor challenges a declined claim o Plus cost of defence if insurer is sued over a declined claim and insurer loses ATE insurance Slide 9

10 Assets and reserving Assets = low risk cash type eg bank deposits Reserving = claims future premiums + expenses + risk margins Claims, premiums and expenses are unknowns Solvency II MCR and SCR, ORSA and SFCR Claims include IBNR and expected future claims Might estimate claims and premiums by product type, by age of policy, by solicitor Care re applying past performance estimates to small data ATE insurance Slide 10

11 Key risks No guarantee a good claim will win Court may reduce the amount of costs awarded or ATE premium IP tax forgotten or incorrect Solicitor may not pay over the correct premium Claims higher than expected o Prospects of success over-estimated o Claim amounts under-estimated Premiums lower than expected o Prospects of success over-estimated o Premium amount over-estimated Legal and political changes ATE insurance Slide 11

12 Term assurance vs ATE insurance Term Life business Inception - before the event Term fixed Claim paid only if lose (life) Sum assured = fixed Premium - regular from outset Premium must be paid ATE General business Inception - after the event Term open-ended Claim paid only if lose (legal action) Sum insured = not fixed (but max limit) Premium single and deferred No premium if lose (legal action) ATE insurance Slide 12

13 Part B - Your view as actuaries Is ATE good insurance? ATE insurance Slide 13

14 Your view fraudulent holiday sickness claims 500% increase in holiday sickness claims between 2013 and 2016 ABTA Cost to the travel industry is up to 240million ATE is responsible? Daily Mail February 2018 Touts in European resorts urge holidaymakers to make bogus holiday sickness claims Bogus holiday sickness claims causing package holidays costs to soar Other European countries don t have similar claims ATE insurance Slide 14

15 Your view impact of costs on NHS The Guardian August 2015 Compensation eats into NHS funds - less for nurses, doctors, treatments etc? ATE is responsible? Greedy ambulance chasing lawyers? NHS paid out 1.1bn in compensation last year. A third of this went to lawyers - one firm submitting a 121,700 bill following a 5,000 claim NHS says that legal aid reforms have led to rising costs Daily Express June billion in NHS claims by 2022 on current trends ATE insurance Slide 15

16 Your view compensation culture The cost of compensation culture - GIRO 2002 A teacher pushed down a flight of stairs had a nervous breakdown, could no longer teach and was awarded 300,000 Daily Mail Dec 2017 Couple face 6,000 costs after losing bogus compensation claim for food poisoning on honeymoon Daily Mail Jan 2018 ATE helps deserving claimants? Or ATE encourages irresponsible or fraudulent claims? Doctor reported to GMC after providing numerous medical certificates to support bogus holiday compensation claims ATE insurance Slide 16

17 Your view compensation culture defined Institute of Actuaries 2008 The desire of individuals to sue somebody, having suffered as a result of something which could have been avoided if the sued body had done their job properly Lord Falconer 2005 Pain, blame, gain The idea that for every accident someone is at fault. For every injury, someone to blame. And, perhaps most damaging, for every accident, there is someone to pay. ATE insurance Slide 17

18 Your view before ATE Bodily Injury Claims - GIRO 1999 The Aberfan Disaster in 1966 Before ATE there was no access to justice if you couldn t afford it? The National Coal Board never accepted responsibility for the accident or paid out any formal compensation This calamitous incident produced no claims despite the nature and scale of the tragedy The first claim resulting from this event was submitted in 1990, when it was well outside the allowed timeframes ATE insurance Slide 18

19 Your view also consider Media tends to report bad news It is not the insurers being blamed and fined for mis-selling PPI Media reports on dubious claims are not criticising ATE What if ATE doesn t exist? ATE insurance Slide 19

20 My personal view ATE insurance is good... Meets a real need Access to Justice for those who can t afford it otherwise Many deserving claimants helped But when abused... X Dubious and false claims Fuels the compensation culture Increased costs to NHS etc and increased costs of PI insurance ATE insurance Slide 20

21 Thank you Any questions? ATE insurance Slide 21