Weighing the options’ (The Actuary, June 2021) is a good article, but it misses out significant points.
First, PPOs are reviewed from time to time to assess the health and other needs of the individual involved. This can increase or decrease the regular payment, which provides a fairer outcome.
Second, there was evidence that part of a large lump sum was diverted from care of the damaged individual by family carers.
Third, an initial lump sum can be required if significant costly changes are required to the home of the individual and vehicle used to transport them.
Finally, the Ogden discount rate was reduced.
It was for some of these reasons that the general insurance industry lobbied for PPOs. Only when they occurred did finance directors raise the issues of the capital required to support them, and seek to revert to a lump sum payment which requires no capital support.
At Commercial Union, where I was in charge of the life insurance business, we looked at the possibility of the life company buying out the annuity on the general insurance balance sheet. Not easy to fix a price, but the life business was better set up to match the liabilities with assets.
Ian Reynolds 6 June 2021