Social Inflation & Claim Litigation Trends

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Anyone paying attention to the news recently has likely noticed what appears to be a trend of ever-increasing jury verdicts and claim settlements, as excessively large awards in the tens- and hundreds of millions of dollars are reported with greater frequency. The perception of a growing trend is reinforced when plaintiff firms cite huge verdicts and settlements in demand letters to convince insurers that a client’s soft-tissue injuries from a low-impact rear-ender do, in fact, have a value greatly exceeding the combined limits of an insured’s primary and excess auto liability policies. Risk-averse insurers or insureds may find themselves overpaying for such claims, contributing to the rise in settlement values and increased demands in future claims.    

This trend of sky-high awards and the increased costs to defend and settle claims is generally described by the term ‘social inflation’. The term reflects both shifting social and cultural attitudes about who should bear risks (i.e., insurers or plaintiffs) and that insurers’ costs have increased above general economic inflation.

Naturally, the insurance industry has attempted to identify the major contributors behind social inflation, and several are regularly cited. The aforementioned publicizing of nuclear verdicts and the ‘numbing‘ of the public’s perception of large numbers, through the news of lottery jackpots exceeding $1 billion, huge contracts for star athletes and celebrity salaries, is thought to desensitize jurors to the value of money and remove restraints from entering large numbers on verdict forms. The increased use of third-party litigation funding (a $12.2 billion industry in 2021) by plaintiff firms has been found to contribute to increased plaintiff legal costs, growing insurer loss ratios, increased consumer premiums and longer case timelines. Societal perceptions of corporations, in general, have dropped while consumer expectations of safety in all circumstances have increased, resulting in jurors being more willing to hold companies to higher standards of responsibility than even those imposed by government safety standards. Rollbacks in tort reforms, such as monetary caps on damages and lengthening of statutes of limitations, as well as plaintiff firm advertising, venue shopping and employment of tactics such as the 'reptile theory' are also commonly cited sources of social inflation.

While agreement on the causes of social inflation is not universal, the trend of increased exposure and costs to insurers is objectively measurable. For instance, insurers saw upward trends in incurred losses from $9.6B in 2010 to $24.1B in 2019, an 11% annual growth. From 2015-2020 the median cost of a jury award over $10M increased by 35%, from $20M to $27M. More recently, the largest ten verdicts in 2023 ranged from $325M to $2.28B, and newspapers are regularly reporting multibillion-dollar settlements of class action lawsuits and multi-district litigation.

There are no quick fixes to dealing with the myriad causes of social inflation. Some suggest that tort reform, such as Florida’s recently passed tort reform package (HB 837: Civil Remedies), might be necessary to halt social inflation, pointing to instances where such reforms had been successful in the past. Others suggest regulation of third-party litigation funders – currently unregulated in most states and at the federal level – could mitigate the effects of social inflation.

But tackling social inflation through legislation and regulation is a slow process and does not necessarily address the underlying social perceptions of corporations or the effects of plaintiff firm tactics. While we wait for the effect of governmental action to unfold, insurers and insureds need to be cognizant of how social inflation impacts claims against them and plan accordingly.


Insurance Information Institute

NAIC Center for Insurance Policy & Research

NAIC Summer 2022 National Meeting

Reinsurance News

Swiss Re Institute


VGM Insurance


Claim Department

The Old Republic Risk Management Claim Department provides oversight of the claims handled by the third-party administrators (TPAs) selected by our Insureds. Claim Specialists liaise with the TPA Adjusters and Insureds to provide guidance on the management of serious claims. The Claim Department is based out of our corporate office in Brookfield, WI.

Brandon Robison