Social inflation refers to increases in claim severity that outpace measures of economic inflation. Commonly cited contributors include third-party litigation funding, sophisticated plaintiff trial strategies, deteriorating juror attitudes toward corporations, and expanded theories of liability.
The term is used primarily by insurers and reinsurers to describe adverse development in liability lines.
Alternative Names:
Legal System Abuse, Liability Cost Inflation
Why it Matters?
Social inflation is the framework carriers use to explain reserve strengthening and rate increases, and it shapes how they evaluate defense counsel performance. For defense practices the practical implication is that historical verdict benchmarks understate current exposure, so valuations anchored to settlements from several years ago will be low. The term is also contested, and plaintiff-side commentators dispute both the framing and the attribution.
Frequently Confused with
Related terms
Frequently asked questions
What drives social inflation?
Is the concept universally accepted?
