Impact of Economic Inflation for US Liability Insurance Claims
US liability claims costs have risen by an annual average of 16% over the last five years, well above average rates of economic inflation at around 4%
Social inflation is a term that describes how insurers’ claims costs are increasing above general economic inflation. This is generally thought to be due to a trend in increasing litigation costs brought by plaintiffs seeking large monetary relief for their injuries. The “social” aspect of the term represents shifting social and cultural attitudes about who is responsible for absorbing risk (the insurer or the plaintiff).
On a broad definition, social inflation refers to all ways in which insurers’ claims costs rise over and above general economic inflation, including shifts in societal preferences over who is best placed to absorb risk.