Social inflation is significantly increasing U.S. insurance premiums in 2025, and its impact is expected to persist and intensify. Social inflation refers to the rising costs of insurance claims that outpace standard economic inflation, primarily driven by societal trends such as increased litigation, larger jury awards (including "nuclear verdicts" exceeding $10 million), aggressive attorney advertising, third-party litigation funding, and a growing public mistrust of corporations.

Key impacts on U.S. insurance premiums in 2025:

• Higher Claims Payouts: Insurers are paying out more for claims due to larger settlements and verdicts, especially in liability lines. This directly leads to higher premiums for policyholders.

• Increased Litigation and Legal Costs: The rise in litigation frequency and severity, fueled by third-party litigation funding and attorney advertising, drives up insurers’ costs, which are then passed on to consumers through premium increases.

• Larger Reserves and Stricter Underwriting: Insurers must set aside larger reserves to cover potential high-cost claims, affecting profitability and prompting stricter underwriting standards and higher rates.

• Premium Growth: Despite some market softening, social inflation is slowing the decline in rates and is expected to keep U.S. property and casualty premium growth strong at around 5% in 2025.

• Affordability Concerns: The cumulative effect of social inflation is threatening insurance affordability, particularly in lines most affected such as commercial general liability, commercial auto, professional liability, product liability, and excess/umbrella insurance.

Supporting data:

• Social inflation drove a 57% increase in liability claim costs over the past decade, outpacing economic inflation by 1.7% from 2017 to 2022.

• Median verdicts against corporate defendants nearly doubled from $21.5 million to $41.1 million between 2020 and 2022, with record numbers of verdicts exceeding $10 million and $100 million in recent years.

In summary, social inflation is a primary factor behind rising U.S. insurance premiums in 2025, especially in liability-related lines, and is expected to remain a persistent challenge for insurers and policyholders alike