Cover: What Is the Evidence for Social Inflation?

What Is the Evidence for Social Inflation?

Trends in Trial Awards and Insurance Claim Payments

Published Jul 9, 2024

by Lloyd Dixon, Nicholas M. Pace, James Davidson, Jamie Morikawa

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Social inflation is a term that has been used to describe social and behavioral trends that are said to expand the liability of parties allegedly responsible for harms and their insurers. Insurers and others have argued that social inflation creates a feedback loop in which rising levels of tort compensation fuel expectations of financial windfalls among potential claimants and the attorneys who represent them, which in turn stimulates the filing of new claims and associated lawsuits. Other observers take a different view, arguing that social inflation is a positive development, better enabling injured parties to receive the compensation that they deserve. Still others question whether social inflation is occurring at all.

Although there is a great deal of discussion and debate regarding social inflation and its purported causes, there is not a great deal of empirical research on whether social inflation is actually occurring. In this report, the authors look for trends in litigation rates, trial awards, and insurance claim payments that are consistent with the expected effects of social inflation. Increases in trial awards and insurance claim severity net of economic inflation would be suggestive of social inflation but would not necessarily provide conclusive evidence. The difference between the growth rates in trial awards or claim severity and economic inflation could be due to social inflation, as well as factors external to the civil justice system.

Key Findings

  • Court filings per capita increased in state courts. The annual number of new tort case filings per capita rose about 10 percent between 2012 and 2019 in 19 states for which data were available.
  • Plaintiff win rates in cases that reached a verdict increased from 53 to 64 percent between 2010 and 2019.
  • Inflation-adjusted trial awards increased. Trial awards per plaintiff in personal injury and wrongful death (PI/WD) cases grew at a 7.6-percent compound annual growth rate between 2010 and 2019. There was little growth between 2010 and 2013 and faster growth from 2014 through 2019.
  • The percentage of trial awards that are large (i.e., $5 million or more) increased between 2010 and 2019. Large awards ranged from 5.5 to 7.5 percent of trial awards between 2010 and 2016, growing to 12 percent by 2019.
  • The inflation-adjusted severity of insurance claims involving bodily injury (BI) increased. For both BI claims and PI/WD cases, there was little growth between 2010 and 2013 and faster growth from 2014 through 2019.
  • Insurance claim frequency decreased, offsetting to some extent any impact of social inflation on loss ratios. The overall decline in frequency between 2001 and 2019 was large enough to nearly or fully offset the increase in severity over that period for all the market segments considered.

Research conducted by

Funding for this research was provided by the generous contributions of the RAND Institute for Civil Justice Advisory Board and the RAND Kenneth R. Feinberg Center for Catastrophic Risk Management and Compensation Advisory Board. The research was conducted by the RAND Institute for Civil Justice within the Justice Policy Program of RAND Social and Economic Well-Being.

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