Social Inflation is a phrase that the insurance industry has been using quite a bit lately. What is it? It describes the increasing claim costs from litigations and jury awards driven by societal attitudes toward the insurance industry. More and more court cases have seen rising claim awards for auto, general liability , umbrella, and Directors and Officers insurance. The juries are reflecting a society that sees the insurance industry as deep pockets. Society feels if there is an opportunity to "stick it" to the insurance company, then so be it.
This is an increasing risk for business owners. Social inflation will drive up insurance premiums. Business owners will have to buy higher limits to cover the rising awards. Insurance companies will tighten their capacity and make insurance harder to buy as choice and policy options dwindle.
What makes this even more interesting is COVID -19. The insurance industry made it clear early on that policies do not cover pandemics. As more and more courts litigate these denials, society is not happy with how the insurance industry is fighting against paying COVID claims. Many feel even if the insurance industry wins most of these cases, COVID-19 will most likely increase Social Inflation.
As the vaccines get rolled out in 2021 and life gets back to some normality, Social Inflation may subside. This would be temporary however as many experts feel peoples sour attitude toward insurance companies, and the industry, is here to stay.
Stay tuned on this one !
Until next time be careful out there and know you risks.
Posted by: G. Kevin Nemith CIC. CRM President, Agency Leader for CNC Insurance & Pfister Insurance. Hilb Mid-Atlantic Group.
knemith@hilbgroup.com
Top 20 insurance brokers and risk managers in the USA.
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