In recent years, insurance carriers have faced a growing concern known as “social inflation.” Social inflation has significant implications for liability insurers, insurance agents, and insureds.
Economic Inflation vs. Social Inflation
Generally speaking, economic inflation is the rise in the cost of goods and services resulting from market supply and demand. It’s often measured using an index, such as the Consumer Price Index. Social inflation, on the other hand, is an increase in prices not driven by supply and demand, but by other societal factors, some of which are addressed further below.
Rising Litigation Costs: One of the key contributors to social inflation is the escalating cost of litigation. In recent years, the frequency of liability lawsuits related to insurance claims has increased, leading to escalating legal expenses for insurers. While the hourly rates of defense attorneys may be increasing (economic inflation), the increasing frequency of litigation (social inflation) is having a greater impact on insurers’ litigation expenses.
Changing Attitudes: Changes in societal attitudes toward lawsuits, corporations, and compensation for injured parties have contributed to higher claim loss payments (settlements and verdicts). A growing tendency to resort to litigation to resolve disputes has impacted this trend.
Larger Jury Awards: Juries are awarding increasingly larger monetary verdicts, particularly in personal injury cases. The number of “nuclear verdicts”, often defined as jury awards of $10 million and greater, and thermo-nuclear verdicts”, often defined as jury awards of $100 million and greater, are increasing. These increasing jury awards have driven up the cost of liability claims and can have a significant impact on insurance premiums.
Impacts on Insurers, Agents, and Insureds
Unlike economic inflation, there is no existing index measuring social inflation, making it difficult for insurers, agents, and insureds to predict the cost of insurance losses. The consequences of social inflation on insurers, agents, and insureds include, but are not limited to:
Increasing Insurance Premiums: The purpose of insurance is to reduce financial uncertainty by spreading the cost of a risk over a larger pool of people or entities. In addition to economic inflation, which economists and insurance actuaries are accustomed to measuring and predicting using objective data, insurers are now tasked with attempting to account for the far less predictable and often far more substantial cost of social inflation. This ultimately results in increased premiums.
Reduced Profit Margins: The impact of social inflation on claim costs can erode profit margins. In response, insurers increase premiums, reduce coverage, increase deductibles, or exit certain markets to mitigate losses. Similarly, insureds may increase the price of their products or services, exit certain markets, reduce insurance coverages, and/or increase insurance deductibles.
Impact on the Availability of Coverage: Social inflation may cause insurers to reconsider the types of coverage they offer. Some insurers may choose to limit or exclude coverage for certain high-risk lines of business [such as professional liability or medical malpractice]. However, other lines of business, including auto liability and general liability are susceptible.
In conclusion, social inflation is a complex issue that has significant implications for insurers, agents, and insureds. It is important to maintain an understanding of the evolving impact of social inflation on insurance and to be prepared for potential changes in premiums and coverages. As this issue continues to evolve, agents need to stay informed about the state of their clients’ insurance needs and engage in meaningful communication with insurers.
Social Inflation and Its Impact on Liability Insurance was last modified: November 30th, 2023 by CWG
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TERMS OF SERVICE AGREEMENT
Welcome to the Continental Western Group® E-Pay Express online bill payment services website, which provides bill payment options and services (such website, options, and services are individually and collectively referred to herein as the “E-Pay Express Services”) available to customers of the Continental Western Group®, an operating unit of Berkley Insurance Company, and affiliated companies (referred to herein as “OU acronym, i.e. “CWG”). CWG® is willing to provide the E-Pay Express Services to you, a customer of CWG, only upon your agreement that your access to and use of the E-Pay Express Services will be subject to the following E-Pay Express Terms of Service Agreement (the “Agreement”). This Agreement describes the terms and conditions under which CWG will make E-Pay Express Services available to CWG’s customers (“you”). The Agreement may be revised without notice and will become effective upon posting on this site and your use of the E-Pay Express Services.I. DEFINITIONSThe following defined terms are used in this Agreement: E-Pay Express is a service you can use to view and pay your CWG bill online securely. CWG has licensed the right to use E-Pay Express from an unaffiliated third party, Fifth Third Bank. and/or its affiliates (“Fifth Third”). Account means the Account with CWG to which you authorize a bill payment to be directed. Payment Instruction means your instruction and authorization to E-Pay Express to make a bill payment to your Account. Payment Account means the bank account that you authorize E-Pay Express to debit when you make your bill payment using account information from your personal or business checking or savings account. Payment Card means the credit or debit card that you instruct E-Pay Express to charge to pay your bill payment. Business Day means Monday through Friday, excluding Federal Reserve holidays. Scheduled Payment Date means the Business Day of your choice upon which E-Pay Express will attempt to complete your bill payment and initiate the appropriate debit to your Payment Account or Payment Card. CWG includes the following affiliated companies of Berkley Insurance Company: Acadia Insurance Company, Continental Western Insurance Company, Firemen’s Insurance Company of Washington, D.C., Tri-State Insurance Company of Minnesota, Union Insurance Company (collectively referred to herein as “Insurers”). All payments processed through E-Pay Express Services are paid to CWG on behalf of itself or one of the Insurers listed above; however, each of the Insurers has sole financial responsibility for its own products and services, including the E-Pay Express Services provided in connection with those products and services. You should refer to your insurance policy for the applicable Insurer.II. DESCRIPTION OF E-PAY EXPRESS SERVICES A. The E-Pay Express Services provide you with access to various online resources, including applications that allow you to view your CWG bill. Unless explicitly stated otherwise, any new features that augment or enhance the current E-Pay Express Services, including the release of new services, shall be subject to this Agreement. Upon your acceptance of this Agreement, CWG grants you a personal, nonexclusive, non-transferable license to access and use the E-Pay Express Services, subject to this Agreement, solely for the purpose of viewing and paying your Account electronically. The foregoing license includes the specific rights to use the available applications and functionalities of the E-Pay Express Services and to print information from the E-Pay Express Services. CWG and Fifth Third do, however, reserve the right to, without notice: (a) modify, suspend or terminate operation of or access to the E-Pay Express Services at any time for any reason; (b) modify or change the E-Pay Express Services or its applicable operating policies at any time; and (c) interrupt the E-Pay Express Services as necessary to perform routine and non-routine maintenance, error corrections, or other changes. CWG also reserves the right to modify this Agreement at any time, in which case you will be provided notice that the Agreement has been changed. Your continued use of the E-Pay Express Services after said notice of the changed Agreement constitutes your agreement with and acceptance of the changed Agreement.
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(a) When you initiate a Payment Instruction, you authorize E-Pay Express to charge your Payment Card or debit your Payment Account and remit funds to CWG on your behalf so that the funds arrive to pay your bill as close to the Business Day designated by you as is reasonably possible. While it is anticipated that most transactions will be processed on the day you choose, it is understood that due to circumstances beyond the control of CWG and Fifth Third, some transactions may take a day or so longer to be credited to your Account.(b) If E-Pay Express is unable to obtain funds for a bill payment for any reason associated with your Payment Card or Payment Account (for example, there is not a sufficient balance available on your Payment Card or in your Payment Account to cover the transaction), then we will not be able to complete your bill payment transaction. If there is a problem in processing your Payment Instruction, CWG or Fifth Third may attempt to contact you, using the telephone number you have provided(c) If E-Pay Express makes a bill payment to your Account, but is unable to obtain funds for that payment from your Payment Card or Payment Account, you agree that your bill payment will be reversed.III. LIABILITY FOR FAILURE TO COMPLETE TRANSACTIONSA. E-Pay Express will use commercially reasonable efforts to process your bill payments in accordance with your Payment Instructions. However, CWG and Fifth Third shall incur no liability if a bill payment is not made in a timely manner or if any payments initiated by you through the E-Pay Express Services cannot be completed because of any one or more of the following circumstances:
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You do not provide CWG or Fifth Third with all required information to complete the bill payment, such as your correct name, telephone number, or your complete and correct Payment Card or Payment Account information; or
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any and all information that you provide to CWG or Fifth Third to use the E-Pay Express Services will be accurate and complete;
you will not use the E-Pay Express Services to access information about any account unless you have authority to do so by the person or company whose account you are accessing;
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