A new study by the Insurance Information Institute (Triple-I), an organisation providing data and analysis on insurance issues, and the Casualty Actuarial Society (CAS), a professional group for actuaries specialising in property and casualty insurance, finds that legal system abuse (LSA) and related litigation trends have significantly impacted liability insurance.
The study estimates that these factors contributed between $231.6 billion and $281.2 billion to rising liability insurance losses over the past decade—an increase far beyond what could be explained by standard economic inflation.
The study, The Impact of Increasing Inflation on Liability Insurance: 2015–2024, highlights that factors such as larger jury awards, litigation financing, and shifting legal practices have significantly increased claims costs and defence expenses across personal auto, commercial auto, other liability – occurrence, and product liability – occurrence insurance lines.
“This analysis illustrates that the severe spikes in liability insurance claims losses go well beyond normal economic inflation,” said Sean Kevelighan, CEO, Triple-I. “Legal system abuse, manifested through excessive verdicts and litigation behaviours, has fuelled a structural rise in claim costs that continues to increase costs for insurers and policyholders alike.”
The report shows that the largest portion of these losses is driven by the rising cost per claim rather than an increase in the number of claims.
For example, personal auto liability losses and defence costs rose by $91.6 billion to $102.3 billion, or 8.7%–9.7% of booked losses, while commercial auto liability saw increases of $52.0 billion to $70.8 billion, representing 22.6%–30.8% of booked losses.
Other liability – occurrence losses rose by $83.4 billion to $103.3 billion, or 27.4%–34.0% of booked losses, and product liability – occurrence costs increased by $4.6 billion to $4.8 billion, about 27%–28% of losses. In total, LSA and related factors contributed $231.6 billion to $281.2 billion to increased liability insurance losses.
Actuarial measures tracking how claim costs evolve, known as loss development factors, have steadily increased since 2008, reflecting the lasting effects of legal system abuse, from litigation financing and attorney involvement to larger jury verdicts and higher settlement values.
“The data clearly show that insurance loss inflation has its own unique drivers,” commented James Lynch, FCAS, MAAA, and co-author of the study with William Nibbelin, Senior Actuary, Triple-I.
“While general economic inflation is an important factor, legal trends, ranging from litigation financing to larger jury verdicts, have amplified costs well beyond what the CPI-U would suggest. Expanding this analysis to broader general liability lines will allow us to quantify inflationary pressures across even more of the insurance landscape, especially given what we’ve observed in civil case trends.”
Previous research by Triple-I and CAS identified social inflation, rising claim costs linked to litigation behaviour and outsized jury awards—as a significant contributor to legal system abuse.
A separate Triple-I report on civil case filings found that excess payouts from motor vehicle tort lawsuits between 2014 and 2023 totalled $42.8 billion, demonstrating how litigation practices directly contribute to higher insured losses. This evidence suggests that roughly one-third of increasing auto liability losses can be traced to LSA.
“While consumer price inflation peaked in 2022, our data show that loss inflation in liability insurance lines remains structurally higher than before,” Lynch continued. “This reflects the combined effects of economic conditions, changing legal dynamics and higher settlement values.”
Losses fueled primarily by legal system abuse and social inflation push insurance premiums higher and create added financial pressure on insurers. The report notes that, even if overall economic inflation eases, liability insurance costs are expected to stay persistently high.
“This isn’t just about prices rising in the economy, it’s about the cost of our legal system escalating beyond sustainable levels,” Kevelighan added. “Recognising and addressing legal system abuse is essential to managing costs and protecting consumers.”
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