Understanding Social Inflation in Insurance Industry
Explore the concept of social inflation in the insurance sector, including its impact on claims, litigation, and entitlement attitudes. Get insights from industry experts and data trends. Discover the challenges and implications of this phenomenon for insurers and policyholders.
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Presentation Transcript
Social Inflation Sean Kevelighan, CEO Insurance Information Institute 110 William Street New York, NY 10038 Tel: 212.346.5533 jamesl@iii.org www.iii.org
What Theyre Saying A broadening definition by society and juries of what is covered by insurance policies Warren Buffett, Letter to Shareholders1977 But the industry has developed a new term for their old target, blaming social inflation in courtrooms for problems that really result from unrelated economic conditions facing the industry. Robert Hunter Consumer Federation of America Press Release, March 9, 2020 Excessive inflation in claims. Occurs when development defies key assumption: Loss Development is RV about stable mean James Lynch, Former Tripe-I Chief Actuary 2
Runaway Litigation 3
Nuclear Verdicts Runaway Litigation Class Action & Litigation Funding Tort Reform Rollbacks 4
COVID-19: Real Time Experience 1,300+ COVID- 19-related employment complaints filed in federal and state courts in 2020. 5
Entitlement attitudes, by age I honestly feel I m more deserving than others. I deserve more things in my life. People like me deserve an extra break now and then. 60% 50% 40% 30% 20% 10% 0% 18-29 Low Entitlement American Jury Centers 30-39 40-49 50-59 High Entitlement 60+ Moderate Entitlement 6
Fewer people think there are too many lawsuits 10% 22% Strongly or Somewhat Disagree Strongly or Somewhat Agree 90% 78% 2016 2018 DecisionQuest, Inc. 7 The Institutes | Risk and Insurance Knowledge Group 7
Social Inflation: The Toll Reserve Development, Commercial Auto Liability Millions Additions to Claim Reserves $3,000 2,572 1,852 1,843 $2,000 1,656 1,634 $1,000 $0 -$1,000 -827 Reductions from Claim Reserves 2016 2008 2009 2010 2011 2012 2013 2014 2015 2017 2018 2019 Sources: NAIC data sourced from S&P Market Intelligence; Insurance Information Institute. 8
Its Not Just Auto 12:36 Loss Development Factors by Year, Long-Tailed Lines Commercial Auto MedMal Claims-Made 1.71 2.28 1.80 2.50 1.53 1.75 1.60 2.00 1.40 1.50 Other Liability Occurrence Other Long-Tailed Lines* 3.00 3.45 3.75 3.00 2.22 2.50 2.96 3.25 2.00 2.75 Medical Malpractice Occurrence, Other Liability Claims-Made, Products Liability Occurrence, Products Liability Claims-Made. Estimate assumes 24:36 Factor is straight average of previous three years. Source: NAIC data, sourced from S&P Global Market Intelligence; Insurance Information Institute. 9
