Offering lump-sum settlements to avoid periodical payments 'could lead to claims inflation'
New rules for settling injury claims through periodic payments will be used to bump up settlements, a leading actuary has warned.
Lane, Clark & Peacock partner Joe Monk said that some defendants were under the impression that they can avoid taking on periodical payments by paying an inflated settlement to buy themselves out of the claim before it gets to court.
Monk said: "Some insurers seem to think that claimants want lump sums and will not risk going to court and getting periodical payments.
"These insurers are taking the view that cases can therefore be settled before going to court at a reasonable cost."
But Monk warned that claimant solicitors could take advantage of periodical payments and demand higher lump sum awards than the equivalent value of a periodical payment.
Monk said: "Solicitors know the industry is having difficulties coping with periodical payments. This could lead to a significant amount of claims inflation."
The other area of concern relates to cases that have to go to court in order to agree the type of payment.
Monk said: "Cases such as those involving minors or mental illness have to go in front of a judge, who may decide that some form of periodical payment is best for the claimant."
The industry is still awaiting full guidance on how and when periodical payments will be applied by courts.