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The Actuary The magazine of the Institute & Faculty of Actuaries

IFoA develops new categorisation scheme for spinal and brain injury

The Institute and Faculty of Actuaries (IFoA) has devised a new categorisation for serious spinal and brain injury claims to help (re)insurers better understand how these sorts of injuries affect mortality.


wheelchair user_shuttershock
Photo: Shuttershock

The IFoA has been collating data from the motor insurance industry to analyse these types of claims, which are often settled by Periodic Payment Orders. PPOs pay claimants at regular intervals rather than in a single lump sum award, thereby transferring risk from claimants to general insurers.

An analysis of 2012 data found that the number of PPOs being settled remains stable. However, the institute said that large claims of £1m or more were now more likely to be paid as PPOs and medical progress meant these liabilities could remain on balance sheets for several decades.

Around 70% of PPOs are for brain injuries, while around 20% are for spinal injuries. The institute said all large claims for brain, spinal and amputation injuries should be categorised in the future, and the required care regime should also be recorded and coded.

Report author Sarah MacDonnell said the impact of mortality on PPO liabilities was significant.

‘We know that the severity of injury has a large impact on mortality outcomes, but to date there’s been no standard way of capturing this, particularly for brain injuries.

‘Whilst this might not be a problem today, it is one that stretches ahead of us and will have an impact in 20, 30 or even 40 years time.

‘With advances in medicine it is not a stretch to see a baby involved in an accident living to 100 and requiring support for the entirety of their lives. By categorising the severity of injuries, we will capture data that can help to provide more accurate mortality estimates and, in so doing, help (re)insurers to better estimate their future liabilities and the reserves required to meet them.’