Social inflation

In 2018, a Houston jury hit the trucking company Werner with an 89.7 million dollar verdict over a 2014 crash; the Texas Supreme Court only threw it out on June 27, 2025, after seven years of reserving. Social inflation is the structural rise in liability claim costs beyond general economic inflation and demographic trends. It comes from behavioral and institutional factors specific to the court system. The trend is strongest in the United States. Nuclear verdicts, awards above ten million dollars for harms often comparable to cheaper precedents, keep multiplying. Proceedings run longer, helped by third-party litigation funding. Plaintiffs open with bigger demands, since jury awards set the benchmark for later settlements. The usual explanations are distrust of large corporations, trial strategies built on punishing corporate behavior, and the professionalization of trial lawyers who run firms structured like investment funds. For insurers the threat is asymmetric. It hits long-tail lines such as general liability, D&O and professional indemnity, where reserves set on older claims prove insufficient several years later. That is why general liability is hardening its rates at the very moment financial lines are cutting theirs. It is only one part of claims inflation, which also covers rising prices for parts, materials and labor; social inflation comes from the judge, the jury and the plaintiff's lawyer.