The Factors Behind Social Inflation's Continued Rise
Social Inflation is a phenomenon that has affected litigation trends in nearly every industry segment, one of the prime examples being education.
Social Inflation refers to rising costs of insurance claims relating to societal trends, increased jury awards and broader definitions of liability. As society continues to shift, this will also be a key driver of the hard market and overall perception of higher education.
Why Is Social Inflation Growing?
There are several reasons why Social Inflation has continued to have an impact on insurance. A write-up from Travelers Insurance, along with data from Gallup and PEW highlight these factors:
- Mistrust Of Education – Public trust in higher education has been on a steady decline in recent years. According to a Gallup Poll, confidence in higher education decreased from 57% in 2015 to 48% in 2018. A PEW study showed that over 61% of the US population thought that higher education as a whole was headed in the wrong direction.
- Sophisticated Attorney Tactics – Attorney's representing plaintiffs are investing heavily in strategic marketing, expanded use of legal data and analytics, and call centers to handle the influx of individuals interested in filing lawsuits.They are increasing their use of policy limit demands in an effort to force early settlements in certain jurisdictions, frequently engaging in venue shopping, and are heavily leaning on social media searches throughout the litigation process (including during jury selection). Other tactics include creative filing of medical costs, influencing claimants to have unnecessary surgeries and treatment, and using third-party funding companies to support longer treatment plans.
- Emotional Juries – Attorneys are more frequently playing with the emotions of the jury. By putting the juror in the plaintiff's position and focusing on what the defendant could have done instead of actual wrong-doings, the attorneys build empathy for the plaintiff resulting in large jury awards. As more juries are desensitized to large awards given to plaintiffs, this practice will continue.
- Changes In the Legal Landscape – New judicial appointments have resulted in a less-tenured bench at the state court level. A less experienced judiciary impacts the ability to predict legal decisions and has led to courts interpreting contracts more broadly. This is to the benefit of the plaintiffs. Other emerging trends like reviver statutes (which we discussed in the October edition of the Education Top 10 Risks series) also play a role as the statute of limitations is extended for many sexual abuse cases.
Talk to your trusted RCM&D advisor today with any coverage questions or if you'd like to learn more about social Inflation's effects on education.