Below is an article from the Travelers Insurance Company. This is worthy of a read as the issues addressed affect your business and the cost of both commercial and personal insurance. I have highlighted a few points to draw attention to the trends which are affecting outcomes.
Social inflation refers to the increase in claim severity above what could be anticipated under the usual scope of economic inflation and claim trends. Below are the top four factors fueling social inflation and the rise in claim costs that follows.
Excessive awards and settlements are becoming less shocking to the public, due in part to highly publicized “nuclear verdicts.” From 2015 to 2020, the median cost of a jury award over $10 million increased by 35%, from $20 million to $27 million.
Today’s increased access to information and the amplification of negative public sentiment towards 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.
Sentiment toward big corporations has been on the decline, and 67% of jurors believe companies knowingly sacrifice safety to make more profit. At the same time, most jurors (89%) believe companies should always have to do more than just meet government safety standards.
Furthermore, 88% of jurors think that companies should take all precautions, no matter how impractical or costly, to ensure the safety of their products. In fact, 58% say that a company bears some responsibility even when a customer is injured while misusing a product.
Changes in the legal environment, which historically limited the amount plaintiffs could obtain in damages, now tip the scales in favor of plaintiffs.
For example, the elimination of monetary caps in some states has led to increased judgments. Also, modifications increasing the length of time during which a case can be filed expands attorneys' opportunity to launch more cases.
Sophisticated plaintiff attorney tactics are also driving inflated judgments. Common strategies include advanced marketing and savvy emotional messaging:
Fueling even more of this activity is the growing litigation funding investment market, in which a third-party invests in specific cases, even plaintiff attorneys find too tenuous to take on, for a contingency fee. In return, the investors receive a cut of any award. This industry was valued at around $12.2 billion in 2021 and is projected to reach $25.8 billion by 2030.
Plan for the worst, hope for the best, and build a war chest with a captive insurance company to protect your business against these trends.
Article Source: 4 Social Inflation Drivers Contributing to Rising Claim Costs
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