Social Inflation

[Parker_Woodruff]

A big topic in aviation insurance discourse is the rise of "Social Inflation" where nuclear verdicts (judgments greater than $10MM) are becoming more and more common.  This discussion hosted by R Street Institute today doesn't specifically address aviation insurance, but I found it informative.  Regarding aviation: High liability limits have become more expensive in recent years after seemingly reaching a low price.  Previously available high limits are many times now not offered (or are cost prohibitive) for certain risks - especially in the single pilot turbine world.

 

Here's an article summary which links to the PDF report on the topic:

https://www.rstreet.org/2021/12/06/the-scourge-of-social-inflation/

 

[Mooneymite]

Thanks, Parker.

Interesting, but discouraging.

[201er]

What about the fact that 100k/1mil is still the de facto norm for GA liability insurance? That might have been something 10 years ago, but with the prices these days it won’t cover all that much.

[Parker_Woodruff]

30 minutes ago, 201er said:

What about the fact that 100k/1mil is still the de facto norm for GA liability insurance? That might have been something 10 years ago, but with the prices these days it won’t cover all that much.

Sometimes $1MM/$200K is only ~$100 or $200 more...worth considering

[201er]

2 hours ago, Parker_Woodruff said:

Sometimes $1MM/$200K is only ~$100 or $200 more...worth considering

Yeah but I think 2/200 should be becoming the new standard. A crash in an urban neighborhood… 

[Parker_Woodruff]

1 hour ago, 201er said:

Yeah but I think 2/200 should be becoming the new standard. A crash in an urban neighborhood… 

That limit isn’t normally too expensive either. Most of the risk is in pax bodily injury. But there’s often an annual IPC requirement for that limit. 

[AIREMATT]

Can you still find $1Million CSL??

[Parker_Woodruff]

2 minutes ago, AIREMATT said:

Can you still find $1Million CSL??

Yeah - I can get $2MM CSL on the primary policy for qualified pilots and then get an excess policy for another $1-2MM or more.

A very qualified owner pilot could probably get $6MM total between primary and excess.

[Tony Starke]

The ambulance chaser radio ads have gotten brazen lately. “Have a wreck, get a check”.  Soon to come to a billboard conveniently posted by your favorite airport, “Been in a crash, get some cash”. It’s not a bad retirement plan for some folks.

[Parker_Woodruff]

12 hours ago, bluehighwayflyer said:

There are two sides to this story.  If you have ever been on the other side of an insurance company that has been all too happy to accept your premiums for decades but then won’t pay up when you finally have a major claim you know what I mean.  I have experienced both sides of this equation.  Neither is fun and who is on the side of right isn’t as clear as some might have you believe.  

Sounds like an issue of whether the carrier is adjusting a claim fairly based on the facts of the situation (if they don't, a bad faith issue may exist).  But the big issue I'm discussing is nuclear verdicts where judgments (and excessive ones at that) are reached on emotions, not facts.

[Parker_Woodruff]

4 hours ago, bluehighwayflyer said:

 

According to a quick Google search, in Q2 2021 the property and casualty insurance industry had a net profit margin of over 23 percent.

Maybe with some inflationary stock market gains on their investments.  No way that's underwriting profit.

Nuclear verdicts isn't my description.  I'm not here to offend...It's my opinion that large verdicts encourage baseless suits in hopes of a settlement.

Here's a Milliman report for US General Aviation for 2020 which likely makes a few assumptions as to how they arrive at examining GA premium, but it's a nice datapoint.

https://us.milliman.com/en/insight/united-states-general-aviation-admitted-market-summary-of-2020-statutory

[Jerry 5TJ]

I believe that a goal is to carry insurance to make settlement attractive enough so that an injured party decides “Better to accept $2M now than wait years for the trial to perhaps get more.”   

[skoozey]

Interesting article. It provides enough evidence that social inflation is at least having an impact on the litigation industry internally. It's harder though to say how much social inflation increases overall costs over the mentioned "known economic factors":

• Price Inflation
• Supply chain constraints (availability)
• Medical inflation
• Catastrophic industry costs

These are some pretty big trends in and of themselves. And my concern is that these social changes to the litigation industry may feedback into and amplify these basic known factors. This would create a secondary but spiraling side effect.

[carusoam]

Sounds like another day in aviation…

if it not one thing it’s another….

That is why AOPA has been around so long…

 

-a-

[A64Pilot]

I keep wondering about those ads, You see Joe got me $4million dollars etc all of the time on billboards.

So where does this money come from? Fl auto liability requirements are something tiny, like $10,000 or similar, and the majority carry just the min required, and it’s a rare person that has $4mil of assets, so where is this $4mil coming from?

I’m thinking getting awarded xxx money doesn’t mean xxx money exists, in other words they don’t collect?

Long ago on international flights, how much a persons life was established and it’s not as much as you might think. It would seem logical to establish a maximum limit?

Edited February 7, 2022 by A64Pilot

[Justin Schmidt]

On 2/1/2022 at 10:43 PM, Tony Starke said:

The ambulance chaser radio ads have gotten brazen lately. “Have a wreck, get a check”.  Soon to come to a billboard conveniently posted by your favorite airport, “Been in a crash, get some cash”. It’s not a bad retirement plan for some folks.

It is why insurance fraud is becoming very common. Someone cut you off and slam on their brakes. I now have 2 dash cams for that reason.

[Justin Schmidt]

On 2/7/2022 at 4:31 PM, A64Pilot said:

I keep wondering about those ads, You see Joe got me $4million dollars etc all of the time on billboards.

So where does this money come from? Fl auto liability requirements are something tiny, like $10,000 or similar, and the majority carry just the min required, and it’s a rare person that has $4mil of assets, so where is this $4mil coming from?

I’m thinking getting awarded xxx money doesn’t mean xxx money exists, in other words they don’t collect?

Long ago on international flights, how much a persons life was established and it’s not as much as you might think. It would seem logical to establish a maximum limit?

Depends who gets sued...The other insurance company or the person. For a person you can actually file for garnishments as well as other ways. The issue is they then usually quit working. I sued a guys insurance company (his fault) for repairs to my car they were refusing to repair.

[Parker_Woodruff]

On 2/7/2022 at 3:31 PM, A64Pilot said:

 

So where does this money come from? Fl auto liability requirements are something tiny, like $10,000 or similar, and the majority carry just the min required, and it’s a rare person that has $4mil of assets, so where is this $4mil coming from?

 

Trucking companies are likely to carry higher limits of coverage.  A lot of people carry umbrella coverage that is $1-2MM above their primary auto policy.

[A64Pilot]

On 2/9/2022 at 9:14 PM, Parker_Woodruff said:

Trucking companies are likely to carry higher limits of coverage.  A lot of people carry umbrella coverage that is $1-2MM above their primary auto policy.

That would be a very small fraction of drivers, a couple of percent, max?

[thinwing]

40 million wrongful death judgement for local drop zone operator....but so far they have collected squat