A by the Geneva Association on the topic of “” addresses the challenges of defining and quantifying the phenomenon.More important, it takes on the question of what insurers and reinsurers can actually do about it.“Social inflation is a term that is widely cited in insurance debates but it is often ill-defined or at best only loosely explained,” the report begins.

Broadly speaking, it “refers to all ways in which insurers’ claims costs rise over and above general economic inflation.” Actuaries typically label such growth in claims costs “superimposed inflation,” the study says, but their measures “may not adequately account for advances in medical technology, which create new therapies, change the costs of treatment, and increase the lifespan of seriously injured claimants,” as well as other considerations.More narrowly, the report says, “social inflation refers to legislative and litigation developments which impact insurers’ legal liabilities and claims costs.” The definitional difficulties are well illustrated in the rendering below, from the study.Understanding what drives these costs – and whether they are temporary phenomena or a long-term trend – is essential to adequately pricing insurers’ exposures and enabling them to pay claims.

Major drivers, possible solutions Rollbacks in tort reforms stemming from past insurance availability and affordable crises have been implicated by some for driving social inflation.The report finds that any such correlations are “weak at best.” More significant, the study found, are shifting judge and jury attitudes in ways favorable to plaintiffs; growing anti-corporate bias; and aggressive tactics used by plaintiff attorneys, including third-party .  What can insurers do to battle social inflation? The report suggests four areas of focus: More on social inflation, from the Triple-I Blog