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Social Inflation

Social Inflation

Definition

Social Inflation — social inflation is the latest buzzword given to the phenomenon of unexpected rising insurance claim costs because of societal trends and views toward litigation. While social inflation as a concept is not new, it recently has become very popular in the insurance press and now appears frequently in the general press. Nearly every insurance company CEO is talking about social inflation and how claims costs are increasing in ways that were not anticipated. Social inflation is similar to any emerging risk, except that social inflation is not an actual risk but a driver of the increased costs to address risks. Like emerging risks, the effects of social inflation may skew reinsurance contracts by significantly altering the economic underpinnings of the reinsurance contract from when originally written.

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