Peter Venetis, Principal Claims Consultant at ValueMomentum

Most people feel that social inflation is a fairly new term in insurance when in actuality it came up 50 or so years ago when at a shoulder meeting for an insurance company Warren Buffett was talking to shoulders and saying that social inflation is a methodology within which people who feel a grieved or wronged in society turn to insurance to compensate them for those deemed wrongs.

Social inflation actually changed dramatically in the 80s when you had the explosion of asbestous claims in the industry and a lot of leading claims roations began to feel that society was looking to write the wrongs of asbestous litigation by attacking the quote unquote deep pockets of insurance companies in order to comment to those who were deemed to be wronged.

So in the mid-2010s we saw yet another transformation evolution in the term social inflation due to factors including change in token, the creation if you will of third party education funding, revised plaintiff tactics, further mistrust in corporations and in institutions — and this is exacerbated by the ability to connect social media and a lot of perceived wrongs and anger that existed in the country and in North America.

In fact, fast forward through the pandemic and people further isolated. This trust further grew from a variety of factors and we saw that the median brick value in 2021 to compensate for foreclosures was around $21 million. Within the last couple years, we’ve seen that more than doubled at $44 million. So the problem is getting much more challenging for ensurers the industry as a whole.