Social Inflation Contributed to $30B Increase in Commercial Auto Costs, Paper Finds


For Immediate Release
Contact: Michael Barry, 917-923-8245,



NEW YORK, March 6, 2023—U.S. commercial auto insurance liability claim payouts increased $30 billion more than would otherwise have been expected between 2012 and 2021 due in part to social inflation, according to an updated paper published today by the Insurance Information Institute (Triple-I), in partnership with the Casualty Actuarial Society (CAS).


The Triple-I/CAS paper, Social Inflation and Loss Development – An Update, revisited previous work that examined changes in loss development from one calendar year to the next. These changes point to an upward movement in the cost of commercial auto liability insurance. The authors consider how phenomena besides general inflation could be meaningful underlying contributors to the upward movement in this cost. Separately, Triple-I has found that legal system abuse and third-party litigation funding are two significant causes of increases in claim costs above general inflation (i.e., social inflation).


In the paper, authors James Lynch, FCAS, and David Moore, FCAS, examined trends in the loss development patterns regularly used by actuaries to then estimate an insurer’s future liabilities. Loss development refers to the changes in paid and case-incurred loss amounts as claims move from initial report to closure.


Actuaries monitor these patterns by looking at a statistic known as the loss development factor, or LDF. To discern annual trends, the paper analyzed the LDFs by calendar year, rather than by more common methods such as accident year or policy year.


By 2019, these factors had been increasing for U.S. commercial auto insurers for more than a decade. The current paper indicated that LDFs in 2020 and 2021 were lower than in 2018-2019, likely a result of the pandemic. But they remained considerably higher than the beginning of the 2010s.


The continued presence of high LDFs “is evidence that a certain level of social inflation remains baked into industry results, even in 2020 and 2021 with the pandemic’s influence,” the Triple-I/CAS paper noted.


Building on the data and analysis incorporated into a paper originally released in February 2022, the updated paper also noted that general inflation is likely to contribute to additional increases in the size of claims, while the toll from social inflation continues to climb.


“The original paper presented a novel, yet straightforward technique that may be used to flag some of the macroeconomic influences on liability lines in the industry,” said Brian Fannin, ACAS, CSPA, CAS Research Actuary. “It also illustrated that the recent past has experienced sizable upward movement in company liabilities. This update shows that the dynamism in the tort landscape continues and is likely more sizable than previously estimated. The authors identify further avenues of inquiry to better understand what mechanisms are underway.”




Video:              Social Inflation
Issues Brief:    Triple-I Issues Brief: Social Inflation



About the Casualty Actuarial Society

The Casualty Actuarial Society (CAS) is a leading international organization for credentialing and professional education. Founded in 1914, the CAS is the world’s only actuarial organization focused exclusively on property and casualty risks and serves over 9,800 members worldwide. CAS members are experts in property and casualty insurance, reinsurance, finance, risk management and enterprise risk management. Professionals educated by the CAS empower business and government to make well-informed strategic, financial, and operational decisions.


About the Insurance Information Institute

With more than 50 insurance company members — including regional, super-regional, national, and global carriers — the Insurance Information Institute (Triple-I) is the #1 online source for insurance information in the U.S. The organization’s website, blog and social media channels offer a wealth of data-driven research studies, white papers, videos, articles, infographics and other resources solely dedicated to explaining insurance and enhancing knowledge.


Unlike other sources, Triple-I’s sole focus is creating and disseminating information to empower consumers. It neither lobbies nor sells insurance. Triple-I offers objective, fact-based information about insurance – information that is rooted in economic and actuarial soundness. Triple-I is affiliated with The Institutes Risk and Insurance Knowledge Group. 

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