Social Inflation and Loss Development

The phenomenon of social inflation has garnered a great deal of attention in the property and casualty (P&C) insurance industry. The term defies strict definition, though it is widely acknowledged to involve excessive growth in insurance settlements. We examine evidence for its existence in standard industrywide claims triangles through 2019. The focus is on commercial automobile liability insurance, though other annual statement lines of business are examined as well. We find development patterns in commercial auto liability are consistent with most descriptions of social inflation. We estimate that social inflation increased commercial auto liability claims by more than $20 billion between 2010 and 2019. Evidence of a similar trend is also present in two other lines of business: other liability—occurrence and medical malpractice—claims made. We also use standard actuarial metrics and visualizations to demonstrate how actuarial insights can be presented to an interested lay audience, such as lawmakers, regulators, the news media, and the public.

This research paper is a collaboration between Triple-I and Casualty Actuarial Society (CAS).