A new report from Gallagher Bassett finds North American insurers facing a structural shift in claims costs, driven by social inflation, medical inflation, catastrophe losses, economic volatility and rapid AI adoption. For adjusters, the result is rising complexity across general liability, property and auto, with longer litigation timelines and higher severity tied to large verdicts and third-party litigation funding.
Medical inflation remains the leading cost driver. Fifty-six percent of North American carriers identified it as the top contributor to rising claims expenses, with medical costs now representing more than 60 percent of US workers compensation losses, citing data from the Workers Compensation Research Institute. Aging workers and increased mental health claims are extending duration and increasing case management demands.
Catastrophe losses continue to strain capacity. According to Gallagher Re, global insured cat losses reached $105 billion in the first nine months of 2025, the sixth straight year above $100 billion. Large US events such as the Los Angeles County fires have added to workload pressure and cycle time challenges.
Carriers are responding with enhanced risk modeling, premium increases and AI-driven predictive analytics. At the same time, AI is fueling new fraud risks, including AI-generated documentation in claim files. Combined with talent shortages in claims and legal roles, the report underscores the need for tighter coordination between claims, underwriting and actuarial teams, along with disciplined reserving, proactive medical management and stronger fraud controls.
