Page 82 - Pharmacy Appeals 1/4/04 to 31/3/05

58 Performance analysis

• An increase of £2 billion in respect of lag Applying an actuarial view of the timing of
and payment patterns and updated mortality cashflows to the known claims provision has resulted
assumptions in respect of potential PPO claims. in an adjustment to the known claims provision of
£2.8 billion in 2021/22. This is partially offset by the
There has been an overall increase of £0.5 billion (from
restatement of the opening provision of £2.4 billion.
the net £0.5 billion provided for in 2020/21) for the
assessed impact of Covid-19 on the provisions. This Item 5: £2.5 billion was paid out during the financial
primarily reflects slightly higher NHS activity in 2020/21 year to settle claims. This is lower than the amount
than was estimated last year (which is therefore expected we receive in claims from another year's worth of

to increase the number of clinical claims), and an increase activity (Items 1 and 2) partly because we generally
in the number of claims owing to delays, cancellations settle high-value cases where ongoing care is a feature
and misdiagnosis reflecting longer waiting lists. with a periodical payment order. This gives a regular
payment to the claimant over the rest of their life.
The remaining decrease of £1.2 billion relates to
the effects of assumptions changes on IBNR for Five years ago (at the end of 2016/17 financial
the other indemnity schemes (including a net year), the number of PPOs in payment was 1,826
decrease of £14 million for the effect of Covid-19 with £179 million paid out that year, and a whole
on the risk of claims covered by other schemes). life value of £12 billion. At the end of this financial
Item 4: The liability has increased by £1.6 billion in year (2021/22), the equivalent figures were 2,530,
respect of changes in assumptions affecting known £336 million and £29.5 billion respectively.
claims. The known claims provision is impacted Item 6: There is a significant increase in the provision
by the changes in inflation and Annual Survey of £42.6 billion due to the reductions in the long
for Hours and Earnings (ASHE) assumptions. term and very long term discount rates specified
• A net increase of £2.8billion relates to claims for use by HM Treasury, which has been discussed
that were open at 31 March 2021 and remain at page 55 of the Finance report. This includes a
open at 31 March 2022. This is due to reserve £1.7 billion increase arising from the adjustment
values, estimated settlement year and probability made to the known claims provision in respect of
of success of individual claims being revised timing of cashflows as set out at Item 4 above.
as more information becomes available.
The changes discussed above highlight the uncertainty
• A decrease of £1.6 billion in the liability relates to affecting the valuation of the provision. The sensitivity
claims closed during the year, either at a lower value of the legal environment to our actions in managing
than expected, or where the claim was repudiated. the cost of claims, the degree of activity in the legal
and health policy arena in response to the growth
An adjustment to the known claims provision has
in costs, and NHS Resolution's view of the effect of
been introduced to allow for the difference between
these on key assumptions may change over time.
the value of claims expected to settle within one year
Resulting small changes in assumptions as well as
of the balance sheet date based on individual claims
changes to discount rates reflecting the financial/market
data, and an actuarial view of the timing of cashflows
environment, as described above, can have significant
based on historical claims settlement patterns.
impacts on the provision from one year to the next.
The settlement date for individual claims is used
Sensitivity of the valuation to changes in assumptions
in the known claims provision calculation to
is discussed in more detail at Note 7.2 on page 134
determine the rate of inflation and discounting to
in the Notes to the accounts section of this report.
be applied. The Covid-19 pandemic has increased
the uncertainty over when claims are likely to settle.
NHS Resolution experienced an unexpected £120
million (5%) reduction in claims payments in 2020/21
at the height of the pandemic, but payments have
increased by £199 million (9%) in 2021/22.
In 2021/22 we have seen an increase in both the
volume and value of claims in our claims data with
settlement dates in the near term. This reflects that claims
management has been disrupted over the last two years.
As a result of this review, we have concluded
that this approach should have been applied to
prior periods, drawing on the information that
was available at the time, as it gives a better
estimate of the known claims provision.