Thursday, January 24, 2013

Future Losses, Statistics and Assumptions, TLABC Conference, Mexico, 2013

This was one of the most intriguing  talks at the conference.  Howard Teasley, an accountant and economist, takes into account actuarial information, all manner of sources and 'number crunches' to give a reasoned future cost profile. He joked that the best thing with a sausage was eating it, not seeing what goes into it.  I have difficulty following my accountants information so its no surprise there are serious gaps in these very rough notes. It does give a jist of the very involved consideration that go into helping decide settlements. Again I apologise for the notes. The slides were informative and the presentation was excellent. It was great seeing it all come together and I fear I was listening and watching the maths on the slides more than making notes.

Future Losses: Statistics and Assumptions
Howard Teasley MA (Econ) CGA, Vancouver,BC
TLABC Medical-Legal Conference , Mexico, 2013

Future earning-capacity loss - diagnosis to estimate 

Distinguish future earning- capacity loss (general damages, hasn't happened, might not) from past income loss (has happened, add up, deduct tax and ei) and non pecuneary loss (assess without expert help

Follow a claim for loss of future earning capacity - and see where you matter -...

Translate experts - to expected and residual work

and translate these future loss into present day dollars

Assumed facts - hard part
-apply medical, occupational and vocational evidence to....
-define what earning capacity she or he had but has lost .....

-put all the education, employment files etc together

Has a paper in the handouts - determinate -  Jack Spark, prospective electrician - know what he was going to do and what he would
Indeterminate (fuzzy) - Ms Joan Smith, single mother, never worked but needed to , now impaired

Assumed facts
date of birth and normal life expectancy
(BC 05-07 life expectancies)

expected education
expected work
expected earnings (own record or statistics)
contingencies and expected working life, effectively given by the participation contingency

Effects of the accident
 - where the medical Ot and vocational repts
-injureies resolved and persisting
-effects on education if any
-effects on work (different job, shorter hours, retire early, statistical reduced capacity, etc
-effects on earnings

Pain a major cause of disability

Contingency statistics

Lower - average income entry job - $16,493
  higher - has high school diploma - $29,329
Less education more likely to work on feet rather than exercise mind

It's hard not to make $10,000 a year so that may be minimum estimate of loss

Other common loss patterns
-work fewer hours
-retire at 55 versus 65

Estimating contingency adjusted present value

Another example
40 year doctor has lost $50 grand  = 1 1/2 million since she plans to retire at 70
Investing a dollar at 2 1/2 %  return less than dollar
Supreme Court  = law and equity act - used 3 1/2 for general earning 
You're discounting
To get the 30 years she has to live
Actuarial/ multiplier considered 
She has to work full time

When we put all the information together
instead of 1 1/2 million gets 1 million instead

Higher your education the more cost when you don't work
Females have more competing responsibilities
Work history eliminates nonparticipators from comparison

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