Severity trend measures cost per claim independent of frequency. Drivers include medical inflation, wage growth, litigation financing, and jury attitude shifts collectively described as social inflation.
Trend varies substantially by line and jurisdiction.
Alternative Names:
Claim Severity Trend|Severity Inflation
Why it Matters?
Trend assumptions compound in reserve and pricing models, which means understating severity trend by even modest amounts produces material inadequacy across a multi-year development period. Distinguishing economic inflation from social inflation matters because the drivers respond to different interventions. Jurisdiction-specific trend analysis produces better calibration than countrywide figures, since venue effects vary substantially.
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Frequently asked questions
Why do trend assumptions matter so much?
Why distinguish economic from social inflation?
