Personal Injury & Wrongful Death- Economic value of future lost wages, income and future medical expenses.
Usually, the determination of damages includes the economic value of loss of future income such as lost wages, social security benefits, other retirement benefits, value of services in the home, and expenses related to ongoing cost of medical care and other expenses - all due to the injury or death. The determination of each of these losses require the use of appropriate actuarial mortality tables and life expectancy to determine economic damages.
Most non actuarial experts use standard actuarial tables, such as population tables, to determine life expectancy and damages. Usually the tables used by the non actuarial expert are not actuarial sound and result in erroneous life expectancies for determining damages to the injured party. The actuary modifies an appropriate mortality table to take into account the lifestyle, pre- existing conditions and family history. Examples of life style and preexisting conditions are smoking, obesity, preexisting heart disease, cancer and even propensity for illnesses related to family history.
The appropriate actuarial table mortality rates may differ significantly from the population tables, resulting in significantly increased or reduced life expectancy and damages to the injured party. The non actuarial expert usually has neither the skills or training to develop an appropriate actuarially sound mortality table. Consequently, they provide damage calculations to the injured party that may differ significantly from appropriate actuarially developed damages. For example, smoking and obesity can reduce life expectancy used by the expert by many years, and non-smoking may increase life expectancy. Therefore, damage calculations require an actuary to determine appropriate life expectancy or rebut opposing parties damage calculations.
Two additional areas an actuary can assist is the determination of future lost wages, social security or other benefits, and an appropriate discount rate. Many experts assume cost of living increases for wages, social security and other medical costs and benefits that exceed the discount rate. However, long term historical evidence indicates that discount rates (usually Treasuries) exceed cost of living (wages) increases.
The other expert many times uses current Treasury rates, or rates specifically accepted by the jurisdiction involved,and average or current inflation rates in their analysis. Today, inflation is actually close to 0 and the Federal Reserve has kept interest rates very low in order to stimulate the economy.
To assume today's economic environment and Fed actions will continue indefinitely has no sound basis. As the economy recovers, we will experience inflation. One of the primary tools the federal reserve uses to combat inflation is increase interest rates. Both our current economic conditions and interest rates have occurred in the past but eventually return to normal historical levels.
The Fed usually tries to keep inflation in the 2% to 3% range. Treasury rates typically are based on a real interest rate, such as 2 or 3%, plus a rate for inflation. Cost of living wage and social security wage increases are primarily based on inflation. This results in discount rates (Treasuries) being greater than cost of living increases for wages and social security. Discount rates greater than cost of living or wage increases reduce the present value of damages, sometimes significantly.
Also, historically medical inflation has been much greater than non medical inflation. But medicare, Medicaid and other state insurance programs have significantly reduced medical care inflation. In order for medicare to be financially sound, medicare reimbursements will have to continue strict controls that will limit future medical cost increases. Therefore, it is unlikely in the foreseeable future to have medical inflation even approach historical levels.
Sample Summary of Qualifications in a recent expert report related to broker compensation
"My name is Steven Eisenberg and I am a consulting actuary. I am a Fellow of the Society of Actuaries (1973) and a Member of the American Academy of Actuaries (1975). The Society of Actuaries is the body in charge of the professional education of actuaries and the American Academy of Actuaries is the body that establishes standards of actuarial practice in the United States. I hold a BS degree in economics (1969) from the Wharton School of Finance at the University of Pennsylvania and I taught actuarial science at Georgia State University.
I coauthored the Society of Actuaries’ study note on Modified Endowments under Section 7702A of the Internal Revenue Code (“IRC”) which impacts the corporate owned life insurance (COLI) and bank owned life insurance (BOLI) products. I also have served on the examination committee of the Society of Actuaries and taught seminar classes to students studying for their actuarial exams. I was president of the Los Angeles Actuarial Club.
I have lectured about COLI/BOLI at numerous actuarial (e.g. Society of Actuaries) meetings, COLI brokers and producer groups, and non-actuarial insurance industry meetings. One such non-actuarial organization is the Association of Advanced Life Underwriters (“AALU”). The AALU’s primary purpose is to maintain the favorable tax treatment of insurance policies and other areas of interest to the membership. The membership includes many top COLI and BOLI producers. My activities with the AALU were primarily in the COLI and BOLI areas.
I have worked 50 years in the life insurance industry, both as a senior life insurance company executive and an actuarial and management consultant. Since 1970, I have worked extensively in the actuarial design, administration and illustration of various life insurance products, including traditional life insurance products, nontraditional life insurance products, universal life (or excess interest products), and variable life insurance products in a separate (segregated) and general account products.
As Vice President and Chief Actuary of Pacific Fidelity Life Insurance Company and Senior Vice President, Chief Actuary and Board member of Beneficial Standard Life Insurance Company, I had direct responsibility for the development of the companies’ life insurance products, making sure they were marketable, profitable, and consistent with industry, actuarial and regulatory standards.
Since 1985, I worked substantially in the COLI and BOLI market (variable and general account products and traditional and universal life insurance products). In 1986, I pioneered the development of large case COLI as a consultant for major life insurance companies, including the development of sophisticated illustration systems for COLI and BOLI products. I designed, priced, and developed administration procedures, set specification for illustration systems, and consulted with brokers on behalf of the major insurance carriers regarding their entry into the corporate market place and design of their COLI and BOLI products. I am currently recognized as a leading expert in the design of COLI and BOLI products.
I founded, developed and was the senior managing partner of Milliman & Robertson’s (now known as Milliman) Atlanta life insurance practice until I retired from Milliman at the end of 1998. Milliman has one of the largest life insurance consulting practices in both the United States and internationally. Almost all of the firm’s COLI and BOLI work was developed or directed by me and the Atlanta office staff. From the mid 1980’s through the mid 1990’s, I consulted with more large life insurance companies to help them enter the COLI and BOLI market and developed more COLI and BOLI products for these companies than any other consulting actuary in the country.
Since my retirement from Milliman, I worked with a marketing organization selling BOLI. In 1999, I started my own consulting firm, Steven A Eisenberg, FSA, LLC specializing in COLI and BOLI products, marketing, expert reports and litigation support. I am a founding member of Mann, Conroy, Eisenberg & Associates, LLC, a consulting firm to insurance companies regarding various COLI and BOLI products and longevity mitigationmin the US and abroad.
Since 1983, most of my clients have been life insurance companies, COLI/BOLI third party administrators and large specialty brokerage firms marketing COLI and BOLI and litigation clients."
Call Steven A. Eisenberg at (404) 307-9861 today to tell him about expert witness and advice required for litigation support.