Damage schedules are sometimes more akin to a "wish list" or "MPs' expenses claim", according to Hel...
Damage schedules are sometimes more akin to a "wish list" or "MPs' expenses claim", according to Helga Munger, senior specialist, Munich Re.
She said that while everyone understands the benefits of periodical payment orders, which can deliver life long security for the claimant, there must be an element of "quid pro quo" involved.
"We do sometimes see schedules that are more akin to wish lists, like an MP expenses claim," Ms Munger added.
She said that the industry must look at the adversarial process and create a more "realistic" and cost-effective way going forward.
Talking about whether periodic payments are cost neutral, Ms Munger said: "We were told by Baroness Scotland that it would be so but that was when it was linked to the retail price index and now it is linked to the annual survey of hours and earnings. ASHE will develop 1.5% to 1.75% above RPI."
She pointed out that one of the challenges posed by periodical payments is that it is difficult to predict life expectancy.
Ms Munger said there are currently only about 60 periodical payment cases in the insurance market: "It's a very slow start but we would expect that in the current economic climate."
She added that claimant representatives are having difficulty in persuading clients to look at PPOs and predicted that there will be a "drive back to lump sums" when the financial climate improves.
Ms Munger commented that the cost and availability of reinsurance will also become an increasing problem. "Lower levels are almost gone and the availability of reinsurance may reduce if we are not able to predict the future," she added.
Talking about the impact on reinsurers, Ms Munger said: "Inflation will be the biggest single change. Some of those cases will last 50 or 60 years."
She concluded that it is hard to determine what will happen after the recession but that every reinsurer she had spoken to is committed to meet the needs of insurers, clients and that the business is monitoring the cases. But that with only 60 cases in the marketplace it is quite hard to tell at this stage what the future holds.
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