If you didn’t have enough on your plate, add increased legal costs or social inflation to the list. What is social inflation? Social inflation has become a catch-all term for increased costs associated with insurance claims, primarily liability claim costs and associated litigation. These expenses have dramatically outpaced general economic inflation.
Key drivers of social inflation include:
Large Jury Awards and Settlements: The rise of large claims has accelerated drastically. There has been a significant increase in claims over $10 million, which are referred to as “nuclear” verdicts. These large settlements are becoming so commonplace that a new term has been coined for settlements over $100 million: “thermonuclear” verdicts.
Legal and Litigation Trends: Third-party funded litigation is also having a direct impact on driving up the cost of lawsuits. Private equity money is flowing into litigation at an unprecedented rate. According to Westfleet Advisors, the U.S. litigation funding market is estimated to have over $16 billion in assets under investment. The market has more than doubled over the last five years and is expected to reach $50 billion globally over the next 10 years.4 Expanded definitions of liability are also driving increased costs.
Society’s Changing Views: Gone are the days when people assumed large corporations, including higher education institutions, would “do the right thing.” We are in an environment of distrust and negative sentiment. Access to information, valid or not, is instantly shared via social media. These sources tend to highlight the negative sentiments. This can influence jurors who ultimately award higher damages.
Legal Advertising: Drive down the highway in your favorite city, and you will notice a significant amount of advertisi