LEGAL SYSTEM ABUSE, NOT JUST ECONOMIC INFLATION, DRIVES LIABILITY INSURANCE LOSSES BY MORE THAN $230 BILLION OVER PAST 10 YEARS, NEW TRIPLE-I CASUALTY ACTUARY SOCIETY ANALYSIS SHOWS

The following information was released by the Insurance Information Institute:

A new analysis by the Insurance Information Institute (Triple-I) and the Casualty Actuarial Society (CAS), finds that legal system abuse (LSA) and related litigation trends contributed to $231.6 billion to $281.2 billion found in increased liability insurance losses over the past decade, a surge that far exceeds what can be explained by economic inflation alone.

The report, Increasing Inflation on Liability Insurance Impact as of Year-End 2024, finds that rising jury awards, litigation financing and evolving legal dynamics have driven higher claims costs and defense expenses for personal auto, commercial auto, other liability occurrence and product liability occurrence.

"This analysis illustrates that the severe spikes in liability insurance claims losses go well beyond normal economic inflation," said Sean Kevelighan, CEO, Triple-I. "Legal system abuse, manifested through excessive verdicts and litigation behaviors, has fueled a structural rise in claim costs that continues to increase costs for insurers and policyholders alike."

Key Findings

Personal Auto Liability: LSA and inflation increased losses and defense and cost containment (DCC) by $91.6 billion$102.3 billion, or 8.7%9.7% of booked losses.

Commercial Auto Liability: $52.0 billion$70.8 billion, or 22.6%30.8% of booked losses.

Other Liability Occurrence: $83.4 billion$103.3 billion, or 27.4%34.0% of booked losses.

Product Liability Occurrence: $4.6 billion$4.8 billion, or 27.1%28.0% of losses and DCC.

Total: $231.6 billion - $281.2 billion

Severity, Not Frequency, Drives the Escalation

Across all lines, claim severity, not claim frequency, is driving loss increases. While the number of claims has generally declined, the average cost per claim has soared, far exceeding overall economic inflation as measured by the Consumer Price Index for All Urban Consumers (CPI-U).

Loss development factors, actuarial measures of how claim costs evolve, have generally increased since 2008, reflecting the sustained impact of legal system abuse, from litigation financing and attorney involvement to larger jury verdicts and higher settlement values.

"The data clearly show that insurance loss inflation has its own unique drivers," said James Lynch, FCAS, MAAA, and co-author of the study with William Nibbelin, senior actuary, Triple-I. "While general economic inflation is an important factor, legal trends, ranging from litigation financing to larger jury verdicts, have amplified costs well beyond what the CPI-U would suggest. Expanding this analysis to broader general liability lines will allow us to quantify inflationary pressures across even more of the insurance landscape, especially given what we've observed in civil case trends."

Legal System Abuse and Civil Case Trends

Earlier research by Triple-I and CAS identified social inflation rising claim costs tied to litigation behavior and outsized jury awardsas a key contributor to LSA.

A separate Triple-I report on civil case filings estimates that excess value extracted through increased motor vehicle tort lawsuits (20142023) totaled $42.8 billion, underscoring how litigation dynamics directly fuel insured losses. While the datasets differ, the civil case evidence supports the conclusion that roughly one-third of the "increasing inflation" in auto liability losses stems from legal system abuse.

"While consumer price inflation peaked in 2022, our data show that loss inflation in liability insurance lines remains structurally higher than before," Lynch added. "This reflects the combined effects of economic conditions, changing legal dynamics and higher settlement values."

Broader Implications

Inflationary losses, driven largely by LSA and social inflation, translate directly into higher premiums and greater capital strain for insurers. The report underscores that even as general inflation moderates, liability loss costs remain persistently elevated.

"This isn't just about prices rising in the economy, it's about the cost of our legal system escalating beyond sustainable levels," Kevelighan said. "Recognizing and addressing legal system abuse is essential to managing costs and protecting consumers."

About the Study

This latest analysis builds upon prior work by Triple-I, usually in conjunction with the CAS, using Schedule P Annual Statement data submitted to the National Association of Insurance Commissioners (NAIC). Over the past five years, Triple-I/CAS has conducted a series of studies using actuarial techniques on this data to detect and analyze inflation in liability lines of business. Earlier papers focused on identifying "excessive inflation in claims," widely known among insurers as social inflation. The current report applies actuarial methods to evaluate loss development factors, frequency, and severity trends normalized by gross domestic product over time, building on this foundational research.

About the Insurance Information Institute (Triple-I)

Since 1960, the Insurance Information Institute (Triple-I) has been the trusted voice of risk and insurance, delivering unique, data-driven insights to educate, elevate and connect consumers, industry professionals, policymakers and the media. An affiliate of The Institutes, Triple-I represents a diverse membership accounting for nearly 50% of all U.S. property/casualty premiums written. Our members include mutual and stock companies, personal and commercial lines, primary insurers and reinsurers serving regional, national and global markets.

About The Institutes

The Institutes are a not-for-profit comprised of diverse affiliates that educate, elevate, and connect people in the essential disciplines of risk management and insurance. Through products and services offered by The Institutes 20 affiliated business units, and backed by more than 115 years of experience as a trusted knowledge partner, we empower people and organizations to help those in need with a focus on understanding, predicting, and preventing losses to create a more resilient world. Learn more at Global.TheInstitutes.org.

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About the Casualty Actuarial Society (CAS)

The Casualty Actuarial Society (CAS) is a leading international organization for credentialing and professional education. Founded in 1914, the CAS is the world's only actuarial organization focused exclusively on property-casualty risks and serves over 11,000 members worldwide. CAS members are sought after globally for their insights and ability to apply analytics to solve insurance and risk management problems.