From: Captive.com/IRMI
Social inflation manifesting itself in large jury verdicts and claims payments has become a serious concern for both traditional market insurers and captive insurance companies.
“When we talk about social inflation, inevitably the conversation flips around to the large claims verdicts,” said Robert Walling III, principal and consulting actuary at Pinnacle Actuarial Resources.
Mr. Walling and others discussed the issue of social inflation and its impact on captive insurance companies as part of a session titled “Impacts on Captives of Economic and Social Inflation” during the Captive Insurance Companies Association 2022 International Conference.
Mr. Walling explained that while “economic inflation” is defined as a decrease in the purchasing power of money reflected by a general increase in the prices of goods and services, “social inflation” is inflation that isn’t explained by general inflation, such as some of the factors underlying increasing court awards.
“What’s interesting about social inflation is it cuts both ways,” Mr. Walling said. “It can actually be negative.” He cited the example of safety initiatives that are noneconomic factors that can contribute to reductions in workers compensation claims severity.