4 Social Inflation Drivers Contributing to Rising Claim Costs

Excessive awards and settlements are becoming less shocking to the public, due in part to highly publicized “nuclear verdicts.” From 2015 to 2020, the median cost of a jury award over $10 million increased by 35%, from $20 million to $27 million.¹ Today’s increased access to information and the amplification of negative public sentiment toward large companies via social media is contributing to shifting societal norms. People have simply become numb to numbers, whether it be publicity around lottery prizes or celebrity salaries. Ultimately, this ongoing desensitization to the value of money helps drive up jury awards in future cases.

Sentiment toward big corporations has been on the decline,² and 67% of jurors believe companies knowingly sacrifice safety to make more profit.³ At the same time, most jurors (89%) believe companies should always have to do more than just meet government safety standards. Furthermore, 88% of jurors think that companies should take all precautions, no matter how impractical or costly, to ensure the safety of their products.⁴ In fact, 58% say that a company bears some responsibility even when a customer is injured while misusing a product.⁵

Changes in the legal environment, which historically limited the amount plaintiffs could obtain in damages, now tip the scales in favor of plaintiffs. For example, the elimination of monetary caps in some states has led to increased judgments.⁶ Also, modifications increasing the length of time during which a case can be filed expands attorneys' opportunity to launch more cases.⁷

Sophisticated plaintiff attorney tactics are also driving inflated judgments. Common strategies include advanced marketing and savvy emotional messaging:

• Advertising — Attorneys are spending about $1 billion for 15 million advertisements per year in both digital and offline channels.⁸ In addition to bringing in more plaintiffs, these ads also have the potential to influence jury pools.
• “Venue shopping” — Using analytics to determine the locations and judges with a track record favoring more generous awards.
• Emotional appeals — Attorneys have moved beyond appeals for sympathy to stoking anger at corporate defendants by appealing to the part of the brain that prioritizes safety and survival.
• Repositioning medical results — Emphasizing results such as diagnostic imaging to focus on the worst-case scenario, often with the intent to demonstrate a need for additional procedures or even lifelong care.

Fueling even more of this activity is the growing litigation funding investment market, in which a third-party invests in specific cases, even plaintiff attorneys find too tenuous to take on, for a contingency fee. In return, the investors receive a cut of any award. This industry was valued at around $12.2 billion in 2021 and is projected to reach $25.8 billion by 2030.⁹