Asbestos Claim Surveys

Insurance claims for asbestos related illnesses soared and is expected to be over £11 billion for the next 30 years according to a recent report.

New research study

New research from the actuarial profession asbestos working party suggests that people who are suffering from mesothlioma related illnesses and made a claim for compensation has doubled since 2004 to 2008.

The previous estimate was £4.9 billion for claims covering the period to 2040 now this estimate has doubled for the period to 2050.

Only around one third of people who are suffering from asbestos related illnesses made a claim in 2004 and this is now two thirds in 2008. These figures are estimated based upon additional information from the Health and Safety Executive (HSE) statisticians for the projected number of deaths from mesothelioma in the UK over the next few decades.

Of course insurance companies would have already factored these increases in claims into their own pricing models and perhaps the ease of claiming for industrial accidents made popular by day time TV “no win no fee” adverts has increased awareness of what people may or may not be entitled to.

This news is a development from the original “definitive guide” that was produced in 2004 by the UK asbestos working party to estimated the impact on the insurance market of asbestos related claims and mortality in the UK. By 2007 evidence emerged that the original statistics produced may have underestimated claims and these claims were in fact increasing faster.

In their new 256 report that has now been produced there is still uncertainty on the actual claims number that will be realised and the report suggests that the final figure could be appreciably more or less than this amount and the statistical models that have been produced provide estimates of anywhere between £5 billion and £20 billion for the years between 2009 and 2050.

The changes to the impact can be summarised in the following table (on the impact on the UK insurance market)

  • Original estimate (2009 to 2040) – £4.7bn
  • Change due to projection of mesothelioma deaths + 0.6
  • Changes due to proportion of deaths that result in a claim +3.7
  • Change due to average cost +0.7
  • Change due to inflation -0.6
  • Change due to extension of projections (from 2040 to 2050) +1.7
  • Change due to non mesothelioma claim types +0.5
  • Total new estimate £11.3bn

So as you can see the bulk of the change (apart from extending the period of the study) is for the proportion of new claims. Although asbestosis claims are broadly in line with expectations the number of claims relating to lung cancer has increased.

More claims being made

The paper shows what they believe to be the main drivers behind the increases in claims (which have really doubled in the past 4 years) as follows:

  • More publicity from various legal cases being settled
  • More use of the internet to research the subject for worried families or the patient themselves means ease of access to the latest information to find more about claims procedures and financial settlements
  • The NHS support network has improved support and it shows that the claim success rate increases if the patient submits a claim prior to death as they are able to produce the witness statements required

Actual claims versus projected.

There is also some insight into the orignal projections made in 2004 and what has actually happened during 2008 showing the increases in certain areas.

  • Mesothelioma claims – 2004 est: £417m – 2008 actual: £924m
  • Asbestosis claims – 2004 est: £174m – 2008 actual: £174m

The data was collected from 12 companies that participated in the survey and looked at claims for the following conditions:

  • Pleural plaques
  • Pleural thickening
  • Mesothelioma
  • Asbestosis
  • Abestos related lung cancer

Mesotheloma Average Cost Assessment

Notification year Settlement year Claimant cost Legal cost % Estimated Nil Claims per claimant
2003 (as per 2004 survey)

 

 NA 156,250 15% 20% 2.5
2003 (as per 2009 survey)

 

 2005 160,234 17.3% 21% 2.7
2006 (as per 2009 survey)

 

 2008 176,657 17.7% 21% 2.2
2008 (as per 2009 survey)

 

 2010 179,519 18.8% 21% 2.1

 

 

The above data suggests that:

  • The inflation rate implied by the average insurance claim over the period 2003 to 2008 is distorted by the fall in the number of claims to claimant (from 2.7 claims per claimant to 2.1 claims per claimant). Therefore it is better to consider the total claimant cost when deriving the underlying claims inflation. The inflation rate is less than 3% per annum over the period 2003 to 2008, and hence more in line with the inflation assumptions outlined.
  • Current average costs for the 2006-2008 notification years from the market survey appear reasonable compared to the data underlying our average cost per claim model. Note that more weight should be placed on the settled costs since the actual incurred averages may be slightly overstated as not all nil claims will be settled and consequently reflected in the average.
  • The 2004 estimate of the Insurance Market average claimant cost for mesothelioma was low. The 2004 estimate of 100% claimant costs was around 10% lower than actual claimant costs at that time.

This analysis is inevitably distorted by the imperfect match between notification year and settlement year information.