Social inflation relates to the increase in claims severity (not the frequency of claims) that would be expected based on economic inflation. The increases in claim settlements have been caused by various factors.

1. Desensitization to large jury verdicts; According to Marathon Strategies 2024 was the largest year by most metrics for “supersized verdicts against companies” aka nuclear verdicts. As defined by Marathon Strategies a nuclear verdict is a settlement over $10,000,000.00. In 2024 there were 135 of these lawsuits against corporations a 52% increase over 2023, and the settlements increased by 116% from 2023. Travelers Insurance sums it up like this- Today’s increased access to information and the amplification of negative public sentiment toward large companies via social media is contributing to shifting societal norms. People have simply become numb to numbers, whether it be publicity around lottery prizes or celebrity salaries. Ultimately, this ongoing desensitization to the value of money helps drive up jury awards in future cases.
2. Negative opinions of corporate America; According to a Gallup poll over 50% of people have a negative opinion of “Big Business”, at the same time many jurors believe companies knowingly sacrifice safety to make more profits according to a Decision Quest National Juror Survey. Other studies have shown that some people believe that a company bears some responsibility for injuries even when the customer is injured misusing a product.
3. Erosion of tort reform; Changes in the legal environment that often limited the amount plaintiffs could obtain in damages now favor the plaintiff in many states. In 2005 Ohio enacted a version of tort reform that has been adjudicated for the past 20 years.      
4. Attorney tactics and litigation funding; Advertising by attorneys has increased      an estimated 39% over the past 4 years with spending an estimated $2.5 billion according to the American Tor Reform Association. The end game to this increased advertising is to bring in more plaintiffs and possibly influence the jury pool. Venue shopping is a method to pick a venue that has judges that favor more generous awards.
5. An emerging trend is litigation funding this is turning claims into an investment vehicle. This is when a party not involved in the litigation invests in a case that is to involved or tenuous to take on a contingent basis, in return the investors receive a portion of the settlement. According to Globe Newswire’s Custom Market this industry was valued at around $12.2 billion in 2021 and is projected to reach $25.8 billion in 2030.

While the Trusted Choice Agents at Richey-Barrett can’t predict if you will have a claim, we are happy to sit-down with you to discuss trends in the insurance industry and how they may affect you, so before you purchase or renew your commercial insurance contact the Trusted Choice Agents at Richey-Barrett.