Social Inflation: What Personal Care Homes Need to Know

Are you prepared for the impact of social inflation on your business and finances? Social inflation is a term used to describe the skyrocketing claim costs in the insurance industry that are outpacing general economic inflation. These rising costs are a threat to policy affordability and potential availability.

Social inflation has several causes, but the public’s anti-corporate sentiment and society’s perception of litigation and relationship to money with juries awarding larger and larger verdicts are at the top of the list. Last year, the Insurance Information Institute and the Casualty Actuarial Society studied the excess losses caused by social inflation in the auto insurance industry and found $20.7 billion in commercial auto losses from 2010 to 2019 that could not be attributed to general inflation. (Jim Lynch & Dave Moore, Social Inflation and Loss Development, Casualty Actuarial Society and Insurance Information Institute, 2022). While we aren’t in the auto insurance business (we only insure personal care homes, adult day care and assisted living facilities), the study also noted the liability lines most at risk outside of auto are commercial general and professional liability.

Other causes of social inflation include the increase in litigation financiers and the reduction of tort reform. Litigation financiers advertise heavily and often have no direct interest in the outcome of the case, they are only concerned with the return on their investment, often pushing claimants to not accept settlements and pursue a trial outcome.  Tort reform refers to changes in the justice system that aim to limit the ability of plaintiffs to bring tort litigation or to reduce damages awarded to the injured party. While reform efforts have been continuous, these regulations are being modified legislatively or challenged on constitutional grounds in several states which increases liability costs.

Social Inflation can affect anyone with an insurance policy, and we all need to ensure that our policies will fully cover us in a time of need. Even if you are not a large corporation, you may be perceived in the same light, particularly if there are damages or injuries, regardless of negligence. Once a lawsuit is filed or presented to a jury, it is too late to reel in the costs associated with social inflation. Thankfully, there are steps you can take to protect yourself from this risk.   

  • Cultivate a social responsibility strategy that shows your business in a positive light. Consider your presence in your immediate community and ways you can give back as well as best practices for an environmentally friendly facility.  
  • Speak with your insurance agent for advice on the appropriate general liability coverage for your facility or care home.   
  • Ensure your employee handbook is updated with best practices and policies that create a culture of safety and that your insurance policy covers employment practices liability. 
  • Use the PCH Mutual risk management and loss prevention resources available to our members via secure log in to

While we work toward meaningful tort reform and reducing social inflation through legislation, members can take the above steps to reduce the threat to their personal assets. Speak with your agent today to see if your policy is leaving you vulnerable.

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