Warning, Rising Claims Cost! Four Factors Affecting Social Inflation

Social inflation can be summarized as the increase in claims costs (severity) due to rising litigation costs, claim payouts (nuclear verdicts), and their impacts on insurance policies and related premiums. As the costs of litigation, settlements, verdicts, and related increases, the cost of each claim increases.  As the costs of claims increase, so does your premium as the insurance carrier must work to balance loss ratios. 

Check out this summary from Travelers’ article:  4 Social Inflation Drivers Contributing to Rising Claim Costs | Travelers Insurance

Below are four factors that are contributing to social inflation:

• Desensitization to large verdicts and Media Impact – as large verdicts become less shocking, they become more accepted.
• Negative Public sentiment and corporate accountability – the public’s and jurors’ pre-disposition, the company could have done more.
• Erosion of tort reform – Controls previously established are being battered
• Attorney tactics and litigation funding – Attorneys are learning to leverage the power of social media to increase their return.

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