Static or fluctuating cap? – IAC Newsletter 36/2013, (August 2013)
Welcome to the 36th edition of Independent Actuaries & Consultant’s (IAC’s) monthly newsletter.
Static or fluctuating cap – Jonosky v RAF, South Gauteng High Court, case no: 1220/2010
The question that needed to be answered was whether a static cap, fixed at the time the calculation is made, should be used to calculate a plaintiff’s future loss of income or whether the cap amount, as at the date of calculation, should be adjusted for inflation for every future year in which the loss is calculated.
It is obvious that a cap that is adjusted for inflation for every future year of calculating the loss will result in the plaintiff receiving a larger payout.
The judge held: “In calculating the future loss of earnings beyond the date upon which such calculation is made, an actuary is duty bound to incorporate a projected future inflation rate on an annual basis.”
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Now for some fun –
A man sat down at a bar, looked into his shirt pocket and ordered a double scotch.
A few minutes later, the man again peeked into his pocket and ordered another double. This routine was followed for some time, until after looking into his pocket, the man told the bartender he’d had enough.
The bartender said, “I’ve got to ask you. What’s with the pocket business?”
“Oh,” said the man, “I have my lawyer’s picture in here, and when he starts to look honest, I know I’ve had enough.”