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Curbing social inflation with litigation technology

A wave of social inflation is severely impacting the bottom line for insurers. Incurred losses grew at a faster rate from 2013 and 2018 than between 2007 and 2013 across personal and commercial auto liability lines, according to the Insurance Research Council (IRC), and social inflation appears to be the primary driver. 

Litigation Funding

The high cost of social inflation

 Social inflation refers to the growth of liability risk, expenses, and claims losses related to litigation trends above the average level of economic inflation. It has been difficult to pin down what drives social inflation because it’s influenced by changeable societal issues, technology advances, and world events—such as the COVID-19 pandemic. Still, the causes are coming into clearer focus. Factors include:

  • Changing public perceptions about litigation, corporations, and income inequality
  • A rise in jury mega-verdicts
  • Increasing numbers of class-action lawsuits
  • Higher workers’ compensation claims costs
  • The growth of for-profit litigation funding
  • State-level tort statute changes

Social inflation costs insurers through increased claims payouts, higher litigation costs and settlements, and greater risks to lines of business and market share.

The rise in social inflation in the last decade has contributed to the trend of higher losses. Commercial auto liability losses grew by 10.9 percent between 2013 and 2018 compared to losses from 2007 through 2013. During the same period, auto liability (PPA) losses increased by 5.6 percent.

A review of U.S. jury verdicts found a 300 percent increase in the frequency of verdicts at or above $20 million in 2019 compared to the annual average of verdict payouts between 2001 and 2010. And the average court-approved settlement was 15 percent higher in 2020 than the prior nine-year average. These massive verdicts and settlements trigger increased loss risk across insurance claim types as it normalizes lawsuits and higher payouts.

Compounding the problem is the rise in for-profit entities funding plaintiff cases for a percentage of the settlement or jury award and new legislation expanding liability.

Empowering a proactive response with legal technology

New legal technology solutions are making it possible for insurers to respond to social inflation proactively and strategically. For example, legal case management platforms provide transparency throughout the litigation process, automating data capture and the initial stages of research. Legal teams and carriers can spot high-risk and complex cases early and design responsive strategies that improve efficiency and case outcomes.

Leverage legal analytics for case prep and savings

Social inflation is unpredictable, but as we understand the phenomenon better, we can recognize social inflation trends and markers more quickly. Analyzing historic data both within your company and across the insurance industry can highlight areas requiring deeper investigation and strategic legal planning. It also guides early decision-making that improves outcomes, such as choosing the ideal firm or litigator for a high-stakes jury trial or understanding that a case needs a top-notch negotiator.

we are developing a suite of legal analytics tools designed to navigate these uncharted waters. To learn more about these revolutionary analytic solutions, contact me.    

Stephanie Fox

Stephanie Fox is the Senior Director of Legal Case Management, Casualty Solutions at Verisk. You can contact Stephanie at

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