Inflation, legal system abuse cost liability insurers up to US$337bil in past decade

WASHINGTON: Auto and general liability insurers in the US incurred up to US$337 billion in additional losses from 2016 to 2025 because of inflation and legal system abuse, according to new research from the Insurance Information Institute.

Triple-I said that the additional losses were between 16 per cent and 19.6 per cent of total booked losses.

The property and casualty not-for-profit's research compares expected losses with actual losses to estimate the additional liability costs in a methodology developed with the Casualty Actuarial Society.

"The report's findings reinforce the need to address excessive litigation costs and promote a balanced legal environment that supports fair compensation for injured parties without imposing unnecessary costs on everyone else," Sean Kevelighan, chief executive officer (CEO) of Triple-I, said.

In personal auto liability, bodily injury claim severity is up 62.4 per cent compared with before the pandemic. Inflation has added up to US$120.1 billion in losses and cost containment expenses, or 10.8 per cent of booked losses.

In commercial auto, additional costs accounted for up to US$86 billion, or up to 34 per cent of booked losses. The research found that claim severity went up 8.2 per cent annually from 2016 to 2025, even as claim frequency returned to pre-pandemic levels.

Triple-I said that commercial auto "shows the strongest actuarial evidence of rising inflation among all lines", with economic inflation not surpassing claim severity since 2008. Commercial auto insurers have also been posting underwriting losses for years.

Product liability saw increasing inflation in 33.6 per cent of booked losses, with claim severity increasing at an annual rate of 22.8 per cent since 2016.

Other liability categories saw additional costs of up to US$125 billion, or up to 36.8 per cent of booked losses.

"Until claim severity growth decelerates broadly across these lines, insurers should expect continued upward pressure on liability premiums, leaving consumers with the prospect of ever-rising premiums," the report said.

​Triple-I on October 30 said US tort costs nearly doubled between 2014 and 2023, rising from US$299.7 billion to US$579.7 billion and significantly outpacing economic growth, in an analysis that drew on a US Chamber Institute for Legal Reform report.