From: Reinsurance News
Over the last decade, the severity of losses in various lines of casualty insurance in the United States has outpaced economic inflation. This trend indicates that additional factors are at play, affecting the costs of claims for both indemnity and expenses, as highlighted in a recent report by AM Best.
As per the Best’s Special Report titled “Social Inflation Remains a Thorn in the Side of Casualty Insurers,” certain lines of insurance have been significantly impacted by social inflation. The most affected areas include commercial auto, professional liability, product liability, and directors and officers liability insurance.
The severity of losses in these lines has surpassed the rate of economic inflation by double or more in many instances, with social inflation likely playing a significant role. For instance, in the product liability line, the average increase in loss severity over the past decade until 2023 was 20.4%, while the average annual economic inflation stood at 2.7%. This indicates that factors beyond economic inflation, such as societal trends and attitudes driving increased litigation and larger jury awards, are influencing claims costs in these areas.
