The Problem with Insurance and Social Inflation

Insurance rates keep rising which leads to higher monthly escrow payments and really puts a drain on a family’s cost of living.  Many factors contribute such as frequency of storm damage and higher cost of materials for repairs, but another more concerning contributor to higher rates is social inflation.  Social inflation increases insurance costs due to increasing litigation, higher jury verdicts, and growing public sentiment against corporations. The impact of social inflation on insurance premiums is becoming significant.

 

1.      Increased Claim Costs: Rising litigation and larger jury verdicts mean insurers have to pay more to settle claims or defend policyholders in court. These increased costs are eventually passed on to policyholders through higher premiums.

 

2.      Legal Expenses: More lawsuits and prolonged legal proceedings can drive up legal expenses for insurers. These costs are factored into insurance premiums to ensure the insurance company can cover their operational expenses.

 

3.      Higher Court Settlements: Insurance companies face pressure to settle claims quickly and for larger amounts. This can result in inflated settlement values, leading to increased claim payouts and subsequently higher premiums.

 

4.      Increased Reinsurance Costs: Reinsurance is a method where insurance companies transfer some of their risks to other insurers. Reinsurers may also face higher claim costs, leading to increased reinsurance costs for primary insurers. These added expenses are passed on to policyholders through higher premiums.

 

5.      Underwriting Challenges: Insurers are reviewing their risk models and pricing strategies to account for the changing landscape. This, in turn, could lead to higher premiums to maintain profitability.

 

Reducing social inflation is a complex issue that requires insurance companies, policymakers, legal systems, and society working together as a whole. Policymakers can consider implementing legal reforms to address excessive litigation and reduce the potential for swelled jury verdicts. This may involve resuming tort laws, introducing stricter guidelines for damage calculations, or implementing alternative dispute resolution mechanisms. Increasing public awareness and understanding about the impact of social inflation on insurance premiums can help manage expectations and reduce the tendency to pursue extreme claim settlements. Educating consumers about the importance of responsible claims behavior and the potential consequences of inflated settlements will contribute to a more balanced insurance environment. Insurance companies and consumers can focus on proactive risk management and loss prevention measures to minimize the occurrence of claims. By promoting safety and risk reduction practices, we can help reduce the frequency and severity of claims, leading to more stable premiums.

 

Angelyn Treutel Zeringue is President of SouthGroup Insurance Services, a CPA, PWCAM, CBIA, and licensed Trusted Choice Insurance Agent.  Reach Angelyn at www.southgroupgulfcoast.com, (228) 385-1177, or azeringue@southgroup.net.

Your Trusted Choice Insurance Agent, SouthGroup Insurance Gulf Coast wants you to know you can call on us with your questions or concerns seeking more helpful advice or answers to your pressing insurance questions. A full insurance review is always your best bet to make sure you have all of the adequate coverage for your personal insurance needs. Remember, we offer a personalized insurance review to anyone who is interested at no charge – just visit any one of our convenient locations!

To help you through the maze of coverages, carriers, premiums, and find ways to save money on your insurance, if you are on the Gulf Coast, contact your Trusted Choice agent, SouthGroup-Gulf Coast http://www.southgroupgulfcoast.com/ , SERVICE TEAM: Angelyn Treutel Zeringue, Tammy Garfield, Tammy Hogue, Melissa Dunn, Alex Treutel,  Anne Gillam, Mark Strickland, Joseph Eagle, Michael Scardino, Melinda Teaford, Wendy Butler, Gabriella Scardino and Brittany Eagle at SouthGroup Gulf Coast. You can reach us by snail-mail: 412 Hwy 90, Suite 6, Bay St Louis MS 39520, email: info@southgroupgulfcoast.com, phone or text:228-466-4498 or 228-385-1177, fax:888-415-8922, FaceBook www.facebook.com/southgroup.gulfcoast , or Twitter www.twitter.com/atreutel ! We now have more locations to serve you - 2505 Pass Road - Biloxi and 412 Hwy 90 Ste 6-Bay Saint Louis, MS.

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