Auto Insurance, Business Insurance, General Liability, Legal Environment

Claims Severity Drives Liability Insurance Losses

November 10, 2025 Jeff Dunsavage Leave a comment

By William Nibbelin, Senior Research Actuary, Triple-I

Economic and social inflation have added a staggering $231.6 billion to $281.2 billion in increased liability insurance losses and Defense and Cost Containment expenses in auto and general liability lines, a new report by Triple-I and the Casualty Actuarial Society.

The study – The Impact of Increasing Inflation on Liability Insurance 2015 – 2024 – says this structural rise in loss costs is amplified by what is broadly identified as legal system abuse.

The dual engine of increasing inflation

The analysis focuses on the total impact of increasing inflation determined through actuarial methods that are unable to decompose the precise contribution of economic inflation versus the role of what Triple-I characterizes as “legal system abuse” — policyholder or plaintiff attorney practices that increase costs and time to settle claims to the detriment of consumers, businesses, and the economy. These practices include increasing litigiousness, third-party litigation financing, and soaring jury awards.

Claim severity powers losses

Across all lines analyzed, claim severity – not frequency – emerges as the primary driver of the escalating losses in liability lines of insurance. While the number of claims (frequency) has either generally declined or remained below pre-pandemic levels across the study period, the average cost per claim (severity) has soared. In commercial auto liability, for example, frequency has fallen dramatically since the pandemic, yet losses have still increased relentlessly because severity has risen 93.5 percent between 2015 and 2024.

Auto Liability

The report’s traditional focus on auto liability lines continues to show the most significant dollar-based impacts.

Personal auto liability: Increasing Inflation added between $91.6 billion and $102.3 billion to losses and DCC for the 2015–2024 period. This represents 8.7 percent to 9.7 percent of losses and DCC for the period and an increase of 20 percent to 26 percent from the previous analysis on years 2014 through 2023. While the implied compound annual impact is lower than in the commercial sector, the dollar amount is huge due to the line’s immense underlying size. Personal auto severity has accelerated significantly post-2019, nearly tripling its compounded annual growth rate to 10.9 percent from 2019 to 2024. Premiums are only just beginning to rebound from pandemic-era lows, lagging the rise in losses.
Commercial Auto Liability: This line continues to sustain higher inflation rates in percentage terms. The total impact of increasing inflation reached $52.0 billion to $70.8 billion (22.6 percent to 30.8 percent of booked losses). This represents an increase of 22 percent to 27 percent from the previous analysis.

A compelling cross-data set comparison with the Triple-I 2025 report, Review of Motor Vehicle Tort Cases Across the Federal And State Civil Courts, suggests that the “excess value” extracted by motor vehicle tort lawsuits—a clear measure of legal system abuse—was approximately $42.8 billion between 2014 and 2023. This quantitative finding suggests legal system abuse accounts for roughly one-third of the total Increasing Inflation effect in auto liability losses.

General liability lines

This year’s analysis expands to quantify the impact across broader general liability lines for the first time, revealing inflationary rates that are equally, if not more, dramatic in percentage terms.

Other Liability – Occurrence: Increasing inflation added between $83.4 billion and $103.3 billion to losses and DCC for the 2015–2024 period. This inflationary problem is comparable in dollar terms to personal auto liability, despite having only about one-third of the loss volume. Its implied annual impact of 3.7 percent on a paid basis is the highest of all the lines studied. Severity in this line grew at a compound annual rate of 6.8% from 2015 to 2024, far outpacing the Consumer Price Index All-Urban (CPI-U).
Product Liability – Occurrence: Increasing inflation added between $4.6 billion and $4.8 billion to losses and DCC for the 2015–2024 period. The smallest line examined exhibits the most dramatic severity trend with a compound annual growth rate of 22.3 percent between 2015 and 2024, resulting in a 512.5 percent severity increase overall. The effects appear to be accelerating, with the impact on Accident Year 2024 alone estimated at over 50% of that year’s booked losses.

For the “claims-made” categories of these liability lines (“other liability” and “product liability”), the study was unable to develop credible quantitative estimates due to shifts in business mix, data variability, and the inherent heterogeneity of the underlying risks. However, these lines have certainly not escaped the increasing inflationary environment.

Looking ahead

The data confirms a difficult truth: Even as general consumer price inflation (CPI-U) moderated to 3.0 percent in 2024—a reduction from the 2021-2023 average of 5.6 percent—the loss inflation in liability insurance remains structurally elevated. This means the economic tailwinds that temporarily exacerbated the problem are lessening, but the foundational issues of legal system abuse persist, locking in a higher rate of loss for the foreseeable future.

For consumers and businesses, this translates directly into higher premiums and a greater strain on their financial well-being. The challenge for insurers is the need to adapt to an elevated inflationary environment to effectively manage future liabilities. Recognizing and addressing the pervasive influence of legal system abuse is therefore essential for both managing risk and protecting consumers and businesses from ever-rising costs.

Triple-I continues to foster a research-based conversation around legal system abuse. For an overview of the topic and other helpful resources about its potential impact on insurers, policyholders, and the economy, check out our knowledge hub.

General Liability

Eliminating Friction From General Liability “Towers”

November 10, 2025 Jeff Dunsavage Leave a comment

By Michael Menapace, Triple-I Non-Resident Scholar

Michael Menapace is a professor of insurance law at Quinnipiac University School of Law, a Fellow of the American College of Coverage Counsel, and co-chair of the Insurance Practice Group at Wiggin & Dana LLP.

Brokers and companies routinely work to assemble multiple insurance policies to build towers of general liability (GL) coverage. They now have a new option that eliminates much of the friction that can occur in underwriting and claims.

For example, when a mass-casualty event occurs, insurers at the primary and lower excess layers may be incentivized to seek an early exit from the claim with as little claim expense as possible; as a result, they may overpay to resolve one claim while providing minimal support to the policyholder defending the other claims. Tension between layers also can arise when upper-layer carriers seek to place as much responsibility as possible on the lower-level carriers who are seeking to minimize their role.

On the coverage side, policyholders can find that their traditional layers of excess coverage may be subject to differing terms, such as whether they provide for a defense. Even when the excess tower contains follow-form policies, inconsistencies can occur when carriers take different positions on coverage, claim value, litigation/settlement strategy, and so forth.

As a result of all of this is, gaps can open in the multilayer tower. For example, a recent claim that was the subject of a lawsuit arising from a large casualty loss in Florida involved one excess insurer seeking to enforce an anti-stacking provision that limited coverage for an event to one payment from the insurers equal to the highest policy limit among the tower participants. In another claim, the higher-layer insurers argued that their layers were not triggered because the lower layer insurer had improperly exhausted.

In addition to these examples, we’ve seen situations in which various excess layers contain different dispute resolution procedures, are subject to varying states’ laws, or have requirements of being resolved in differing jurisdictions. Brokers and policyholders can find managing their excess tower time-consuming and challenging at a time when they could be focusing on the defense of the mass casualty event or other large loss.

Addressing these challenges

Chubb, Zurich, and National Indemnity (the reinsurance arm of Berkshire Hathaway) have formed a new facility that seeks to eliminate some of these challenges. It provides a single layer of commercial umbrella coverage up to $100 million, typically following a $10 million primary layer. Many of the terms will be familiar to brokers and policyholders: Coverage A for Bodily Injury and Property Damage, Coverage B for Personal and Advertising Injury, and an Optional Coverage C for Auto and Employers Liability.

A unique feature in the United States, the program has “single-desk” underwriting style so that brokers can work with one point of contact for the underwriting of the entire layer of excess coverage. Flexibility is also an advantage because the program is being written on a surplus lines basis, which means more discussions can be had on terms and conditions.

Traditionally, general liability coverage is written on an occurrence basis, which can keep the insurer on the risk for decades after the policy period expires. Insurers price that long-tail exposure into premiums. This new program can be more affordable because it is written on a claims-made basis, while including a multi-year extended reporting period to protect the policyholder. This can save the policyholder money when compared to traditional programs.

Just like underwriting, claims will be handled with single point of contact, with one of the carriers taking the lead. Once the claim is tendered and being defended, the fact that this group of leading insurers is on the risk means the collective experience of some of the industry’s biggest, most sophisticated carriers is at the disposal of the insured. If a coverage dispute does arise, the policy provides for resolution via a single arbitration that applies consistent procedures and the law of a single state – again, streamlining the process and resolution for the policyholder.

While some of the features are offered in the London market, this provides brokers and policyholders with a U.S.-based solution with added benefits and features.

Homeowners Insurance, Risk-Based Pricing

Illinois Lawmakers
Reject Risk-Based
Pricing Challenge

November 6, 2025 Jeff Dunsavage Leave a comment

By Lewis Nibbelin, Research Writer, Triple-I

Illinois insurers narrowly avoided increased government involvement in insurance pricing as state legislators rejected “an extreme prior-approval system found nowhere else in the country,” according to a joint statement from the American Property Casualty Insurance Association, the National Association of Mutual Insurance Companies, and the Illinois Insurance Association.

If approved, the bill would have given regulators the authority to block rate change and order refunds from insurers for premiums deemed excessive, effectively generating “fewer choices and greater instability,” the statement continued.

While calls for the bill began in July, following homeowners’ insurance rate hikes, Illinois has a history of legislative challenges to actuarially sound pricing. Similar legislation in Louisiana passed that same month, amid record rate filing rejections in Pennsylvania and two California lawsuits accusing insurers of deliberately underinsuring policyholders to maximize profits.

Such trends underscore pervasive misunderstandings surrounding risk-based pricing, the practice under which insurers offer different prices for the same coverage based on risk factors specific to the insured. Without it, insurers could not adequately cover mounting natural catastrophe losses, inflationary pressures, and other rising costs, leading to an insufficient policyholder surplus to pay claims. When surplus falls below a certain threshold, insurers must raise premium rates, adjust their coverage availability, or, in extreme cases, become insolvent.

Under this pricing methodology, Illinois benefits from better coverage affordability compared to the national average and a competitive insurance market of more than 200 operating insurers.

“Illinois has a very stable insurance marketplace,” said Triple-I CEO Sean Kevelighan. “Restrictive legislation could lead to a California-like regulatory environment that would impact insurance affordability and availability in the state, rather than help consumers as intended.”

Rather than involve themselves in the complexity of insurance pricing, policymakers in Illinois and elsewhere would do a greater service to their constituents by exploring and investing in risk reduction through cost-saving mitigation and resilience investments. The property/casualty insurance industry can be a valuable partner in such beneficial approaches.

Learn More:

New Illinois Bills Would Harm — Not Help — Auto Policyholders

Resilience Investment Payoffs Outpace Future Costs More Than 30 Times

L.A. Homeowners’ Suits Misread California’s Insurance Troubles

California Insurance Market at a Critical Juncture