Social Inflation and Its Impact on BI Settlements

Social Inflation and Its Impact on BI Settlements

January 27, 2021 – What is social inflation? If you’re a stat junkie who happens to work in or around the personal injury litigation arena, have I got a white paper for you!

Last June, the Insurance Research Council published Social Inflation: Evidence and Impact on Property-Casualty Insurance. This fascinating 18-pager is very readable. Further, it lays bare the impact evolving societal trends have on the rising cost of settlement and verdict values. By extension, social inflation impacts insurance industry profitability.

Every policyholder, claims handler, actuary, lawyer, and citizen who reads this paper will get a helpful glimpse of the future.

Anger Driving Claims Costs?

social inflation anger

Personal injury lawsuit filings seem to correlate directly to societal anger.

One of the more interesting tidbits is the observed link between Americans’ general anger and their tendency to file personal injury lawsuits.

Recent Gallop polling suggests nearly one in four people are angry on any given day – the highest level in more than a decade.

No analysis was performed indicating the source of individuals’ anger.

A Role for Structured Settlements

Because of their unique ability to match future dollars with future needs, structured settlements can be especially helpful in addressing another social inflation trend. The so-called “nuclear” verdicts, or those exceeding $10 million, have emerged as a major threat to long-term insurance company viability.

With personal injury filings expected to continue increasing and nuclear verdicts a statistical reality, structured settlement usage is expected to continue serving a vital role in dispute resolution.

Perhaps the biggest stunner of the paper is this statistic: Average jury verdicts against trucking firms have increased a whopping 654% since 2012 and now top $17 million!

With actuarial-adjusted pricing available for those with severe injuries, structured settlements permit the negotiating parties to resolve their claims more cost-effectively before trial.

Somber Final Thought

It’s worth mentioning all the data collected for this paper predated the emergence of COVID-19. It will be interesting to see the pandemic’s impact on social inflation going forward.

Photo by Icons8 Team on Unsplash

Comments

Finn Financial Group