Before the COVID-19 pandemic, the frequency of cases against insurance companies was flat for the prior three years and in 2019, the average settlement value dropped to the lowest in a decade. Our review found that over the last twenty years, after adjusting for inflation and population growth, insurance claims payments have stayed essentially flat (and for some lines of insurance, payouts have gone down), while premiums have gone up and down in sync with the insurance industry’s economic cycle.įurthermore, the number of lawsuits against insurance companies has not increased. Best, which is the largest credit rating agency for insurance companies. CFA and CJ&D reviewed claim and premium data from A.M. Importantly, the basic underlying arguments don’t stand up to scrutiny. The only thing different this time is the name. This has happened about every 12 to 13 years over the last half century. As the CFA/CJ&D report (and the 2019 report it updates) explains, this is all part of the insurance industry’s economic cycle in which companies raise rates, blame the litigation environment for the hikes, push for restrictions on consumer legal rights, and – win or lose those battles – eventually forget about the problem when the economic cycle turns. Growing number of lawsuits brought by shareholders, especially activistsĭespite the new term, we have heard this before.Big verdicts resulting from worsening truck crashes.This phenomenon, depending upon who is telling the story, stems from: In recent years commercial insurance premiums have risen substantially and insurers are pinning the blame on the invented phenomenon of social inflation. Instead, insurance companies are hyping up this assertion as an excuse to price-gouge businesses and consumers. When we look at the data, the theorized “social inflation” does not exist and claims payouts by insurers are not skyrocketing. But is this story true?Ī new report by Consumer Federation of America (CFA) and the Center for Justice and Democracy (CJ&D) – INVENTING SOCIAL INFLATION 2023 – details the two key lies in the story industry executives and lobbyists are pitching. Their latest fable: that rampant premium increases for businesses, non-profits, doctors, and truckers among other commercial insurance policyholders are the result of a new trend the insurance industry has dubbed “social inflation.” According to this account, lawyers, lawsuits, judges, and juries are suddenly becoming more aggressive and endorsing massive payouts in court, causing insurance costs to spike. Insurance companies are very fond of increasing their policyholders’ premiums and then crafting an explanation for the hikes that fits their interests, even if it doesn’t fit the data.
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