RANCHO MIRAGE, Calif. – Social security inflation is having a growing impact on insurance claims, but there are steps captive owners can take to combat its effects, experts say.
All insurance sectors are affected by social inflation in some way, said Amy Klatt, Atlanta-based vice president of captives and programs-claims at Skyward Specialty Insurance during a panel session Tuesday at the Captive Insurance Companies Association 2023 International Conference.
“It applies to all claims, across all industries, across all sectors out there in the market,” Klatt said.
Commercial auto/transportation, medical malpractice, professional liability, directors and officers liability and product liability are the five areas of the industry most affected, she said.
Many of these claims have a bodily injury component, which is what drives losses, she said.
About 80% of potential jurors don̵
7;t trust companies and believe they value profits over safety, said Caryn Siebert, Orange County, Calif.-based vice president of carrier engagement with Gallagher Bassett.People are trying to teach big business a lesson, Siebert said. “There’s a feeling by jurors that if I hit them with a $100 million verdict, it’s not going to teach them a lesson. It has to be a billion dollars,” she said.
The impact of jury trials and higher jury awards trickles down earlier in the claims settlement stage, said Colin Donovan, Chicago-based president of Stico Mutual Insurance Co., a risk retention group. Stico provides pollution liability for manufacturers and contractors of storage tanks.
About a year ago, the risk retention group noticed an increase in the frequency and severity of its claims, Donovan said. In its first 15 years of existence, Stico averaged about one large claim — those over $100,000 — every three years, but in the past five years it has averaged nearly three large claims each year, he said.
“What’s driving it in our case is the settlement costs,” Mr. Donovan.
In an environment where insurance losses are increasing due to social inflation, there are various steps captive owners should take to manage the effects, Klatt said.
Maintaining compliance with state regulations and licensing requirements, ensuring adequate hiring practices and retention, and establishing a safety culture and documenting it are important, she said.
Using technology like vehicle cameras, consulting with insurance professionals and documenting claims can also help tell an organization’s story and avoid a nuclear verdict, Klatt said.
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