Covid set to worsen social inflation impacts

30 May 2022

The covid pandemic is likely to worsen social inflation impacts that have already made the claims landscape more challenging and expensive for insurers, a US industry executive says.

AmTrust Excess and Surplus Division Senior Vice President Erich Bublitz says social inflation is being driven by adversarial legal procedures combined with a litigious culture, resulting in high jury awards or settlements known as “nuclear verdicts”.

“Corporate mistrust and a growing animosity for large institutions increased during the past two years, especially towards companies that profited during the pandemic,” he writes on Risk & Insurance. “It remains to be seen if these trends will translate into even larger nuclear verdicts.”

Mr Bublitz says general liability has started to see impacts, which are extending to segments including professional, directors’ and officers’, employment practices liability insurance (EPLI) and cyber.

Currently there are more than 4000 EPLI cases or claims that are awaiting court dates or completion and industries such as health care and tourism may see a rise in litigation when the pandemic ends.

“It’s probable that liability claims caused by Covid-19 will be substantial, spread out over several years instead of several quarters, as legal procedures are bound to be lengthy and delay settlements,” he says.

Due to some of the unique exposures written on an E&S basis, that area may be even more impacted by social inflation, he says.

The article was highlighted by the US Insurance Information Institute (III), which has been looking at the effect of social inflation.

“The Covid-19 pandemic has had an impact across all parts of society,” III says. “As we take a closer look at the topic of social inflation, we can’t help but wonder what effect the pandemic has had on the phenomenon.”