Personal damage compensation

From analysing the trends and changes in different countries over the last years it can be concluded that monetary compensation in personal damage claims is still substantially increasing worldwide.

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Main reasons for this global trend are:

Court decisions seek for deep pockets in the private insurance industry
Consumer protection propels legal and regulatory changes that favour the plaintiffs
Basis for the calculation of compensation amounts changed in several jurisdictions
Increasing medical and care costs, also resulting from new treatments leading to a longer life expectancy
States try to reduce their expenses for social systems and shift costs to the insurance industry
Expenses for non-economic damages tend to explode in several jurisdictions
Compensation for mental anguish creates new and unpredictable demands
Court proceedings tend to be long-lasting (> 10 years) in certain countries

Recent developments and outlook for selected countries:

USA

The fact that in many cases juries decide personal damage amounts, may increase the likelihood of excessive and/or unpredictable damage awards in the USA. In contrast to many Western European nations, juries will not have either legal knowledge or guidelines at their disposal to lend consistency to judicial rulings. In this context, non-economic damages as well as punitive damages should be observed. Unlike punitive damages, which can be subject to specific limitations, no higher legal requirements must be satisfied to award non-economic damages. Due to the lack of guidance, such decisions may be erratic or abusive. Medical monitoring costs as a specific type of damages are available in 20 states and can expose insurer to higher liability.

Argentina

Despite very detailed guidances for the judges codified in the Argentinian civil law as to how to decide in the lawsuits, they often apply a broader discretionary power. This fact and the existence of different procedural laws in Argentina exacerbates the differences between rulings and makes them unpredictable. In cases of third party liability coverage in connection with public services it could be observed that deductibles, agreed between insurer and insured, have been declared unenforceable or invalid by the courts. Because of this possible subsequent change of the agreed insurance conditions, insurers were exposed to higher unexpected liability, without a possibility to price that into their calculations.

China

Personal injury awards are related to local average wage levels and therefore vary greatly between more and less developed parts of China. On average, personal injury awards are quite low, though they have been rising by 5% to 10% a year in response to strong wage growth and the increasing cost of medical treatment. A one-off factor which has increased awards since September 2019 is a Supreme People's Court ruling that accident victims with a rural household registration should receive the same compensation for death and disability as an urban resident in the same province. Traditionally, compensation for rural residents was based on much lower rural income levels.

India

Litigation awareness in India has been growing over the years as people become more aware of their rights and seek legal remedies for various issues, also thanks to the new Consumer Protection Act from 2019. Advocacy groups and legal professionals are working to create awareness and fight for fair compensation for victims of personal injuries, which may lead to higher compensation payouts in the future. Landmark judgments that establish higher compensation standards for personal injuries can influence future cases.

Conclusion

If it comes to personal damage compensation (re)insurers have to be aware of the changes and developments in the respective markets and hence always need to be prepared to adapt the way they conduct business in those legal environments. Whenever necessary (re)insurance wordings, underwriting and reserving strategies should be adjusted.