By the spring of this year, the financial press was filled with articles documenting the pause in numerical and medical inflation. But few outside the insurance industry are discussing—or maybe even aware of—social inflation, which is climbing.
Executive SummarySocial inflation, marked by a rising propensity to sue and higher jury verdicts, is a growing threat to the property/casualty insurance industry's profitability, according to Assured Research Analysts William Wilt and Alan Zimmermann. Here, they describe three relevant trends pushing social inflation to levels not seen in two decades. Among them is increased lawyer advertising fueling litigation activity in several U.S. metro areas.
An inflection point in loss cost trends, fueled by social inflation, could actually be the No. 1 threat to the property/casualty insurance industry’s already marginal profitability, according to a June 2017 Assured Research report. Evidence is mounting that social inflation is rearing its head after nearly a 20-year hiatus.
What Is Social Inflation?
There is no one commonly accepted definition of social inflation, but most would agree that it contains elements of changes in the propensity of the legal system to interpret contracts broadly or to reward plaintiffs with rising levels of awards. Social inflation also encompasses the trend of claimants to involve an attorney in their claim—or to file a claim or lawsuit in the first place.
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