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The insurance industry’s present hard market is being caused in part by a number of social and economic factors fueling the increased frequency and severity of claims.

Termed social inflation—generational shifts of juries, litigation funding and social movements are some of the underlying factors encompassing the increase in claim-related expenses.

Examples of trends impacting claim size

  • Litigation funding is placing more resources into the investigation and defense of claims, resulting in the number of claims going to trial and higher settlement amounts.
  • An increase in attorney involvement is raising the overall cost to settle claims. The volume of claims has also resulted in an expansion to the settlement or resolution timeline. One result of this is higher settlements for bodily injury claims as the cost to restore the individual is elongated. Workers’ compensation is paying for employee injuries or damages for longer periods of time as they await treatments, and the cases see more oversight and review.
  • Jury behavior is being influenced by societal shifts of the perception of wealth. As visibility and perception of high wealth individuals, millionaires and billionaires, it has led to the desensitization of jury awards. Shifting generational views of corporate social responsibility and accountability is resulting in corporation’s payment for damages regardless of definitive fault.


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Social inflation is having a significant impact on auto, umbrella and excess coverage. As a result, these coverage lines continue to be more challenging to renew/place, presenting higher rates across industry segments.

The insurance industry noted an average 17.3% increase to umbrella premiums during the first part of 2020. Umbrella pricing has been flat for consecutive years and the explosive cost increase is the re-shift in addressing capacity and profitability.

National carrier partners are offering umbrella and excess coverage for 2x the price at half of the limits, with “$5 Million is the new $25 Million,” a common reference to excess layers. The Excess and Surplus space is experiencing higher volumes of submissions, indicating the primary market is tightening and pushing previously acceptable coverage risks out of their appetite and into the MGA/wholesale space.

Providers are tightening their appetites and underwriting guidelines due to the overall costs related to social inflation. As a society, more cases are going to trial and the average award size has magnified. Companies have noted the average $100,000 claim from three years ago now averages $300,000. The increasing costs to settle a claim translates to carriers raising premiums to manage profitability, or return on equity.


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