GIRO October, Edinburgh

Transcription

1 GIRO October, Edinburgh Bodily Injury Where next? Tim Jordan The MDU Cherry Chan Barnett Waddingham James Turner The MDU 14 October

2 Questions Comments Expressions of individual views by members of the Institute and Faculty of Actuaries and its staff are encouraged. The information in this presentation is based on our understanding of current taxation law, proposed legislation and HM Revenue & Customs practice, which may be subject to future variation. The views expressed in this presentation by Cherry Chan are those of the presenter. 14 October Purpose of Presentation Long time admirers of the Third Party Working Party Compare and contrast Clinical Negligence claims to Motor Bodily Injury claims Wealth of data available on NHSLA claims Draw out any insights that will predict future for Clinical Negligence claims and give insight into future for Injury claims 14 October

3 Introduction to NHSLA The NHS Litigation Authority (NHSLA) was established in Provides indemnity for all claims made against NHS organisations Works to improve risk management practices Unlike insurance, claims are met on a discretionary basis Source: NHSLA Reports 14 October Introduction to NHSLA First, patients who have been injured as a result of clinical negligence must have access to justice, so that they can receive proper compensation. Secondly, this huge area of public expenditure must be kept under proper control, so that the resources of the health service are not being squandered unnecessarily on litigation costs. Lord Justice Jackson, 2009 Source: Review of Civil Litigation Costs: Final Report December October

4 Billions 14/10/2013 Introduction to NHSLA 25 NHS clinical negligence liabilities CNST Reserve 10 Ex-RHA Reserve ELS Reserve / / / / /13 Financial Year (ended March 31st) MDU interpretation of NHSLA data 14 October Introduction to NHSLA How big is 22 Billion? Source: Jay Epperhart blog 14 October

5 No. of PPO claims 14/10/2013 How does it work? CNST is a pay-as-you-go scheme Each member s CNST contribution is determined in the following way: The NHSLA Board determines the total amount to be collected based on actuarial analysis of the estimated value of claim payments in the forthcoming year. The total amount to be collected in 2012/13 to cover claim payments and scheme expenses for CNST is 950m; the total amount is then split between members according to their relative risk within the scheme to determine a basic contribution; each member s basic contribution is adjusted to allow for: material favourable or poor claims experience to date; and any discount applicable as a result of the level of Risk Management achieved by the member. Source: NHS CNST contribution Finance Q and A (1).pdf NHSLA Annual Report 14 October Similarities to other liability classes - PPOs NHSLA - Number of PPOs / / / / / / / /13 Settlement Year NHSLA Motor & Liability Source: GIRO PPO working party paper 2012 and IUA PPO Study 14 October

6 Similarities to other liability classes February 2012 NHS Chief Executive letter regarding promotion of Personal Injury Services August 2013 Sky News report suggests still occurring Creative Commons 14 October Differences to other liability classes Unlike TPI, where fraudulent claims are an issue for whiplash there seems to be no evidence of fraudulent claims being reported to the NHSLA We have also strengthened our approach to claims where claimants exaggerate their symptoms, to ensure that payments are made only where it is appropriate and only to those who are entitled to receive compensation. Source: NHSLA Annual Report 2012/ October

7 Differences to other liability classes 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% Ratio of legal costs to damages for NHSLA clinical claims closed 45.9% 33.2% 55.2% 51.5% 55.1% 54.9% 41.0% 39.2% 43.6% 44.3% 12.7% 14.2% 12.3% 11.5% 10.6% % Defence Costs of damages % Claimant costs of damages % Total costs of damages Steep increase in claimant costs as percentage of damages Defence costs as percentage of damages 0.0% 2008/ / / / /13 Financial Year NHSLA Annual Report 2012/ October Differences to other liability classes Approximately 40% of all those claims received by the NHS are resolved without a damages payment Source: NHSLA Annual Report 2012/2013 In 2012 around 70% of MDU medical cases were resolved without a financial settlement with the claimant Motor TPI nil proportion about 18% 14 October

8 Claims Reported Frequency Reported Claims frequency Clinical Vs Motor Third Party Injury claims 25.00% 20.00% The average rate of inflation for the reported claims frequency by LTPS exposure is 10.8% shown by the dotted line 15.00% 10.00% 5.00% 0.00% 2005/ / / / / / /2012 NHS LA Claims Freq - LTPS exposure NHS LA Claims Freq - Population exposure Motor TPI Claims Frequency Linear (NHS LA Claims Freq - LTPS exposure) Source: NHSLA, Third Party Motor Working Party, ONS 14 October Claims Reported Change Year on Year* 50.00% Analysis of claims frequency YoY change 40.00% 30.00% 20.00% 10.00% 0.00% 2006/ / / / / / % % % % NHS LA Claims Freq - LTPS exposure Change YoY Motor TPI Claims Frequency Change YoY NHS LA Claims Freq - Population exposure Change YoY Source: NHSLA, Third Party Motor Working Party, ONS 14 October

9 Change in c osts of claims Costs of claims 14/10/2013 Claims Severity Average cost of paid claims 140, ,000 The average rate of inflation for total claim severity is 10.6% shown by the dotted line 100,000 80,000 60,000 40,000 20, / / / / / / /2012 Year Total Damages Defence Costs Claimant Costs Linear (Total) Source: NHSLA 14 October Claims Severity Change Year on Year 70.00% Change in Average cost of paid claims (%) 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% % 2006/ / / / / / % % Year Total YoY Damages YoY Defence Costs YoY Claimant Costs YoY Source: NHSLA 14 October

10 NHS LA Motor TPI 14/10/2013 Compare with Motor Third Party Injury (TPI) 140,000 Average Cost Per Claim Clinical Vs Motor TPI 12, ,000 10, ,000 8,000 80,000 60,000 40,000 6,000 4,000 20,000 2, / / / / / /2013 NHS LA Motor TPI - Source: NHSLA, Third Party Motor and PPO Working Party 14 October Compare with Motor TPI indexed values Indexed Average Cost Per Claim / / / / / /2013 NHS LA indexed Motor TPI indexed Source: NHSLA, Third Party Motor Working Party 14 October

11 Lost Time ($) Medical Only ($) 14/10/2013 Workers Compensation Top 10 US States Average workers compensation claim costs top 10 US states 70,000 1,600 60,000 1,400 50,000 The average rate of inflation for medical costs is 5.6% 1,200 1,000 40, , , , Lost Time ($) Medical Only ($) Source: Oliver Wyman Examining Costs and Trends of Workers Compensation Claims 14 October Motor TPI/TPD ratio vs CMC density Source: The Isles of Wonder,Third Party Working Party GIRO 2012, reproduced with kind permission 14 October

12 Number of clinical claims reported 2011/12 by Post Area by SHA Interpretation of NHSLA data 14 October Exposure 2011/12 by Post Area by SHA Interpretation of NHSLA data 14 October

13 Frequency of clinical claims 2011/12 by Post Area by SHA Interpretation of NHSLA data 14 October Frequency of clinical claims by SHA including the number of births (2011/12) Number of births in 2011/12 Interpretation of NHSLA data 14 October

14 Frequency of clinical claims by Post Area 2006/ /12 Interpretation of NHSLA data 14 October Frequency of clinical claims by Strategic Health Authority 2006/ /12 Interpretation of NHSLA data 14 October

15 Jackson Reform - background Legal Aid, Sentencing and Punishment of Offenders Act 2012 Aim controlling the rising costs of the civil litigation process speed up claims settlement Main changes Methods of funding Cost budgeting 14 October Post Jackson comments Changes Effect Outcome Success Fee no longer recoverable from losing party, cap at 25% of the claimant s damages ATE insurance premiums no longer recoverable from losing party except for expert reports Lower defendant s costs if they lose and put some responsibility to claimants to control their own legal costs Controlling the cost of litigation 10% increase in general damages Compensate for the claimant having to pay success fee and ATE premium out of their damages Qualified One-way Costs Shifting (QOCS) Claimant no need to pay defendant s costs if the claim is unsuccessful Part 36 offers Make both sides consider Part 36 seriously hope to speed up claims settlement Claimants may receive less damages than before Risk that lower value claims may no longer be economic to pursue (is that fair? ) Claimant may have to pay the ATE premiums up front or fund from their own fund Claimants may receive less damages than before Solicitors may not recover full fees as before too No need for ATE premium except for their own disbursement. Defendant cannot recoup their legal fees if they win See more claimants part 36 offers? 14 October

16 An International Perspective Annual Clinical Negligence Payouts USA Annual Payout $3.6bn Population 313.9m Scotland Annual Payout 55m Population 5.3m Wales Annual Payout 46m Population 3.1m England Annual Payout 1.26bn Population 53.0m New Zealand Annual Payout NZD 106m Population 4.4m Italy Annual Payout > 10 bn Population 60.9m MDU Research, October Approaches Taken in Different Jurisdictions Tort reform: examples - United States and Australia No fault schemes: Sweden, New Zealand, FL, WV, under active consideration in Scotland; has been considered for UK in late 70s, 90s Arbitration: Germany (from 1970s) and France (Patients Rights law of 2002) NHS Redress Act 2006 sets framework for claims less than 20,000 but no plans to bring into force in England. A similar scheme is in force in Wales for claims up to 25,000 (hospital claims only) 14 October

17 What Could Happen in the UK? Law Reform Personal Injuries Act 1948 (S2(4)) means awards in the UK are made without regard to care that is available through the NHS Tort reform: has reduced costs in US and Australia. Favoured by the MDOs. Caps on damages for future care costs and caps on loss of earnings? No fault schemes: effect on costs uncertain. NZ scheme does not look especially cheap; some level proof still needed reduction in legal costs; more open culture Change to discount rate? 14 October Summary NHSLA liabilities are large and growing Nature of future claims costs is uncertain, especially effect of Jackson reforms Basing NHS liabilities on cost of private care per 1948 Act may be unsustainable 14 October

18 Questions Comments Expressions of individual views by members of the Institute and Faculty of Actuaries and its staff are encouraged. The information in this presentation is based on our understanding of current taxation law, proposed legislation and HM Revenue & Customs practice, which may be subject to future variation. The views expressed in this presentation by Cherry Chan are those of the presenter. 14 October