One of the factors driving social inflation is the phenomena of third-party litigation funding and litigation lending, according to Triple-I, noting that lawsuit funding from hedge funds and other financial third parties has become a $17 billion industry worldwide. (Credit: jamesteohart/Adobe Stock) One of the factors driving social inflation is the phenomena of third-party litigation funding and litigation lending, according to Triple-I, which noted lawsuit funding from hedge funds and other financial third parties has become a $17 billion industry worldwide. (Credit: jamesteohart/Adobe Stock)
Social inflation alone was responsible for commercial auto claim payouts increasing by more than $20 billion between 2010-2019, according to a study by the Insurance Information Institute (Triple-I) and the Casualty Actuarial Society. Further, legal costs make up 40% of losses in commercial auto, according to CLARA Analytics, Inc. During 2018, the average verdict in lawsuits exceeding $1 million and involving a truck accident was $22.3 million. Additionally, "mega verdicts" and "nuclear verdicts" are also rising, according to CLARA Analytics. From 2014-2018, the median verdict amount among the 50 highest single-plaintiff bodily injury verdicts nearly doubled, increasing from $27.7 million to $54.3 million. Triple-I reported commercial auto was the line most impacted by social inflation trends, according to the study, which found that ultimate losses in commercial auto were declining relative to GDP before 2009. They have been growing faster than GDP ever since. Further, a previous report from the American Transportation Institute found that the size of jury verdicts increased 33% from 2010-2018. |

Litigation funding on 'steroids'

One of the factors driving social inflation is the phenomena of third-party litigation funding and litigation lending, according to Triple-I, noting that lawsuit funding from hedge funds and other financial third parties has become a $17 billion industry worldwide. Additionally, the tech community is laying hands on the capital sector as one tech start-up is attempting to gamify lawsuit financing by facilitating online buying and selling of "lawsuit shares." Mark Dubois, former Connecticut chief disciplinary counsel, wrote for PC360 sister site Law.com that the tech-focused litigation funding platform is "like litigation financing, but on steroids. Lots of steroids. The projected returns on investment are huge." While social inflation is driving up commercial auto rates in a major way, it is hardly the only influencing factor. The slideshow below highlights other factors that are driving up commercial auto rates, according to a review by CLARA Analytics. Related: |

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Steve Hallo

Steve Hallo is managing editor of PropertyCasualty360.com. He can be reached at [email protected]

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