“Social inflation” is considered one of the major emerging risks that the insurance industry must face.

While people may misconstrue the term as relating to the rising impact of social media on online behavior of netizens, it has actually to do with increasingly hostile legal environment that insurance carriers are facing today.

This manifests in the form of much larger verdicts, liberal treatment of claims by boards, more aggressive plaintiff bars, etc.

This article explains the trend and describes measures that carriers can deploy to keep a check on increasing legal expenditure.

Here are some signs of the phenomenon: A major P&C insurer anticipates $40 million in quarterly legal costs for property losses alone; there is a 94% increase in assignment of benefit (AOB) lawsuits in the state of Florida in the last five years.