Insurers need to take a comprehensive and collaborative approach to stem the rising tide of social inflation.

Executive Summary

Setting up mock jury trials, taking cases to trial and refraining from issuing "hammer" letters to lower-layer insurers are just three of the strategies Aspen's Chief Claims Officer Tony Rai suggests that insurers start undertaking—in concert with their insureds—to rein in social inflation. Although nuclear verdicts can't be eliminated, they can be better managed, he writes, also advocating for appropriate claims handler caseloads that recognize the growing complexity of claims.

This approach should be one that involves not only assessing corporate risk and developing and implementing strategies with their insureds and co-insurers but also, collectively, working with lawmakers to help eliminate its root causes.

However, insurers need to acknowledge that the risk of a nuclear verdict is one that needs to be better managed by the industry but can never be eliminated.

Aside from the financial and reputational damages for insurers and insureds, social inflation can lead to inadequate or unaffordable insurance for consumers, resulting in more expensive or unavailable services. More broadly speaking, its consequences can lead to a ripple effect that is beyond insurance—impacting societal, economic, legal and behavioral norms.

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