The Gazette 1991

g a z e t t e

april 1991

5. THE ACTUARIAL

MULTIPLIER

5.1

What is required

In very simple terms what an

actuary is called upon to do is

indicate the capital value of

each £1 per week or month or

year that has been lost.

Clearly, in order to do this, we

need to know:

- the age and sex of the

person

- for how long the loss

would have continued

- the state of health of the

person

In order to calculate the

"capital value" or as it is more

often referred to in court, the

"multiplier", the actuary in

addition must decide on:

- the mortality table

- marriage rates

- discounting factor

- tax

to use in his calculations.

5.2

Age

Very often we might be given

the age of a Plaintiff or of a

dependant only to find out at

a later stage perhaps even just

as one is about to go into

court, that the age originally

supplied is incorrect. A doctor

might have prepared a report

in 1985 say in which he states

the age of the Plaintiff. In 1987

the solicitor writes to the

actuary quoting the age from

the doctor's report. Clearly

this is incorrect. It is essential

therefore, in my opinion, that

one be supplied with dates of

birth and not ages.

5.3

Duration of loss

In an injury case perhaps it is

over-simplifying matters to say

that wages loss would con-

tinue to retirement and that

expenses would continue for a

lifetime. There can be varia-

tions on this in that loss might

commence in 5 or 10 years

time or alternatively medical

evidence might be that the

Plaintiff will recover in 5 years

time after which there might

be no loss.

If we are contemplating a

fatal claim then the loss

suffered by a widow would be

the support she got from her

husband which would have

continued for as long as both

were alive. If we are con-

sidering the death of a son or

-daughter who was contri-

buting at home then any loss

sustained by the parents might

have continued for as long as

one of the parents was alive

and the son or daughter was

not married.

5.4

State of health

Unless indicated otherwise an

actuary must assume that an

individual's life expectancy is

normal. If there is any question

of a reduced life expectancy

the extent of that reduction

must be quantified by a

medical expert. An actuary is

" . . . an actuary must

assume that an individual's

life expectancy is normal."

neither qualified nor in a

position to indicate the extent

of any reduction of life

expectancy.

5.5

Mortality

It could be argued that it

would be appropriate to use

population statistics or more

specifically a life table derived

from Irish Census Returns. In

my opinion we are more often

than not dealing with mortality

that is more likely to be active

service than population.

Population mortality includes

persons of all states of health

and, in particular, permanently

disabled and permanently

unemployed people. Full active

service mortality would not be

appropriate either in that not

all the people involved would

be actively employed.

In practice we use the

A49-52 mortality table, rated

down for females. We are

currently looking at the

appropriateness of this table

compared to population

statistics. The life table

derived from the 1986 Irish

Census Returns is not yet

available. In the life table

derived from the 1981 Census

male mortality is approxi-

mately in line with the A49-52

but there is some evidence

that the rating down currently

used for females is in-

su f f i c i en t. Further con-

sideration of this is being

deferred until the life table

based on the 1986 Census is

available.

5.6

Marriage rates

Marriage rates for use in our

calculations have been derived

from successive Irish Census

Returns. The current rates

come from the 1986 Census

and represent the proportion

of the population who do not

remain single.

In a case involving the death

of an independent son or

daughter contributing to his or

her parents there is considered

to be loss to the parents if the

contribution is more than the

cost of maintaining the son/

daughter. In turn, such loss is

assumed to continue while at

least one parent is alive and

the deceased not married.

Hence the need for marriage

rates.

5.7

Discount rate

When I first became involved

in court work in the early

1960s I remember using a rate

of interest of 6% which moved

out to 6

%. The practice at

that time was to take the long

term yield on Government

Stock and deduct a y

Inflation then was of very

small amounts. I can remem-

ber interest rates escalating up

to the very large amount of

8% and inflation ceasing to be

insignificant. Capital values

would be given based on 8%

and also on 5% being 8% less

inflation at a rate of 3% as an

example.

Let me quote again from the

Chief Justice's judgment in

the appeal of

Donnelly -v-

Brown:

"As to the choice between

the 5% and 8% tables it

should be noted that this

court has on a number of

occasions

- and most

recently in Long -v- O'Brien

& Another

(unreported,

Supreme Court, 24th March

1972) stated

that the

accepted annual allowance

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