Social Inflation: What "Record Settlements" Mean for Your Insurance Rates
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If you've driven any stretch of highway recently, you've likely noticed the countless billboards advertising the "largest personal injury attorneys" or touting "record settlements." These flashy signs beg the question: how are these settlements possible on such a massive scale, and what does this mean for the insurance industry—and you?
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What is Social Inflation?
Social inflation refers to the rising costs insurers face due to societal trends that increase claim payouts. This isn't about economic inflation but rather factors like jury awards for lawsuits climbing higher than ever, legal system changes, or evolving public attitudes about responsibility and compensation.
Why Are We Seeing It?
Several forces drive social inflation:
- Litigation Funding: Third parties now fund lawsuits in exchange for a cut of the settlements, encouraging more high-stakes cases.
- Nuclear Verdicts: Juries are awarding astonishing amounts in damages, often exceeding $10 million, to punish perceived wrongdoing.
- Changing Public Sentiment: Many people now expect corporations and insurers to foot the bill for accidents, sometimes without limits.
- Attorney Advertising: Those billboards? They're part of an industry spending billions on ads to bring in more cases.
What’s the Impact on Insurance?
Insurers adjust premiums to reflect the growing risks of larger claims. This means:
- Higher Costs: Premiums for businesses, auto, and even homeowners insurance may rise to account for these trends.
- Reduced Coverage: Some insurers may restrict policies, leaving gaps in protection.
- Industry-Wide Pressure: Small and medium-sized businesses especially feel the squeeze, struggling to manage the balance between adequate coverage and affordability.
What Can We Do About It?
While social inflation may seem out of our hands, there are proactive steps to mitigate its effects:
- Risk Management: Implement safety measures and policies to reduce the likelihood of claims.
- Engage Experts: Work with your insurance agent to identify cost-effective coverage options tailored to your needs.
- Stay Educated: Understand your policy limits and exclusions to avoid surprises in the event of a claim.
- Advocate for Reform: Support efforts to address runaway legal costs and ensure fairness for all parties.
Don't Let Social Inflation Drive Up Your Costs—Act Today
At Top O' Michigan Insurance Solutions, we're here to help you navigate this challenging landscape. Whether you're a business owner, homeowner, or driver, our team can guide you toward risk management strategies and coverage solutions that work for you. Contact us today for a personalized insurance review and keep rising costs from taking you by surprise.
If you're ready to start vetting your insurance options, we’re here to help - contact us today or request a quote and we’ll walk you through what makes our agency different.
If you’re looking for and insurance agent in Michigan. You may also like to take a look at these great resources for insurance:
Now you’re either currently investing a lot of money into your insurance policies or getting closer to making this decision. We don’t want you to make any mistakes with a decision of this magnitude. So instead of basing this huge decision on a quoted number on the computer screen or a piece of paper – we thought you’d like to know that you can work with one of the knowledge members of our team so that you can become well educated on your insurance before buying.
For more insurance and risk management guidance or questions about your policy's coverage limits, contact us today.
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About the Author
Tyler Bartosh (Connect with me on LinkedIn)
A third-generation insurance agency owner and agent since 2007, Tyler Bartosh is the consummate “insurance geek,” using his passion for business, knowledge of insurance, and advocacy for clients to help serve as the expert buyer of insurance. He helps businesses implement risk management strategies that save both time and money, so those resources can be put towards other initiatives in your company.
Away from his career in insurance, he enjoys spending time with his family & friends, volunteering throughout the community, golf, fishing, snowboarding, hiking and virtually anything outdoors and traveling to see live music. Tyler has a wife Emily (who is also an underwriter in the insurance industry), their dog Lucy and a baby girl, Sophie Constance.
About Top O' Michigan Insurance Solutions:
At Top O’ Michigan Insurance Solutions, we pride ourselves on using our skills to provide clients with competitive pricing, stability and understanding, and peace of mind. With seven locations throughout Michigan and 24/7 client access, our team is your 'expert buyer' of insurance for home, auto, farm, boat, motorcycle, business owners, workers compensation, bonds, life and health, employee benefits and more.
We will provide unparalleled and caring service to our clients through our knowledgeable staff and give back to our employees, agency, industry and our communities. Part of our mission is to give back to the Michigan communities we serve. This is something we take action on through We Care and you can learn more about our community outreach at TOMIA247.com/WeCare.
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Disclaimer: This Blog/Web Site does not provide insurance or legal advice. This site is for educational purposes only as well as to provide you with general information and a general understanding of insurance, not to provide specific legal advice or specific contract advice. Viewing this site, receipt of information contained on this site, or the transmission of information from or to this site does not constitute a client relationship.
The information on this Blog/Web Site is not intended to be a substitute for professional insurance or legal advice. Always seek the advice of a licensed agent in your state pertaining to insurance and legal issues.
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