What is an Actuary?
In the process of representing our clients in court, it’s necessary to call on industry experts to help validate your claim. A professional’s assessment of a claim can make or break a case, and we strive to strengthen your claim by selecting the appropriate specialists. We’ve worked closely with physicians, engineers, and other expert witnesses in a variety of cases. One of the most important expert witnesses tends to be an actuary.
What is an actuary?
An actuary can be defined as a statistician who uses data analysis to calculate financial risk. They look at trends in sectors of the economy and offer advice for insurance companies, private investors, government agencies and homeowners.
A great example of an actuary at work would be determining how much an insurance company ought to charge for homeowner insurance. In-depth research on factors like location provide enough information for an actuary to propose a payment plan that’s profitable and safe for the company.
The source of an actuary’s significant role as an expert witness comes from their ability to determine the ‘value’ of money and how it changes over a set number of years. Quantifying present values for lost wages or services and forecasting amounts required for sufficient care are both within the scope of their abilities. For this reason, an actuary’s presence is crucial in correctly indicating how much is owed to those who have been involved in personal injury, wrongful death, professional negligence, and wrongful dismissal cases.
Inflation and interest rates both play a role in the change the dollar value sees annually. If you were owed $10,000 in 2000, and hadn’t received the payment until 2014, the value of that sum would have changed considerably. To accommodate for these shifts, several provinces have adopted discount rated for civil claims.
Discount rates are percentages removed from annual payments, designed to help accurately reflect the current value of the dollar and ensure a fair amount is being paid to a plaintiff. However, not all provinces share the same discount rates.
In a report by Nova Scotian actuary Jessie Shaw Gmeiner that was published earlier this year, she compared the discount rates between provinces and how drastically the dollar amount claimed could be. In her report she uses an example of $50,000 being paid annually to a plaintiff for 25 years. In Nova Scotia the discount rate for motor vehicle accidents is 3.5%, so a resident of Nova Scotia would be paid $814,000 in total, where a resident of British Columbia would be paid $1,009,000 - a result of the rate being only 1.5%.
Right now, the Nova Scotia discount rates have not changed since 2003, with a general rate of 2.5% and motor vehicle accident (MVA) at 3.5% ⓵. Even though the economic climate has changed ever year since that last 2003 adjustment, Nova Scotia has failed to do so. It’s for this reason that Jessie Gmenier wrote her report, urging Nova Scotia legislature to determine the discount rate in a way that’s fair to the plaintiff and accurately reflects the current economy. Ontario, for example, determines their discount rate annually based on reviews published by the Canadian Institute of Actuaries. Although every solution to this problem has its own advantages and disadvantages, it is a topic that needs to be discussed and one that we’ll be following closely.
At the end of the day, actuaries play a very important role in personal injury and insurance law. Their analytical skill set is pivotal in assisting victims of negligence see the compensation they rightfully deserve. If you have a claim that you believe requires an actuary’s advice, do not hesitate to call us at 1 888 434 0398 or contact us here.
Update: Nova Scotia's 3.5% MVA rate was rescinded effectively immediately August 1, 2015 due to Jesse Shaw Gmeiner's report. The MVA rate in Nova Scotia is now 2.5% per Civil Procedure Rule 70.06.
For more information on actuaries, follow the links below:
Distinguished Atlantic Canadian actuary Brian Burnell - http://www.burnellactuarial.ns.ca/
Jessie Shaw Gmeiner's Actuarial Services - http://www.gmact.ca/
The Canadian Institute of Actuaries - http://www.cia-ica.ca/
Actuary resources, such as future value calculators - http://www.mckellar.com/