Group charges insurance sector with creating fake crisis

By Judy Greenwald

The insurance industry has created a “fake” crisis allegedly generated by high jury awards, although it is enjoying a record surplus, say two consumer organizations, in a report issued Monday.

Insurers have blamed social inflation, the term used to describe rising jury awards and settlements, as one of the principal drivers behind recent increases in insurance prices.

This “overcapitalized industry is already charging many businesses far too much in premiums while threatening even greater increases, all while attempting to create the perception that it is too financially troubled to pay clams,” says the report How the Cash-Rich Insurance Industry Fakes Crises and Invents Social Inflation, which was issued by the Washington, D.C.-based Consumer Federation of America and the Center for Justice & Democracy at New York [] Law School.

“Yet this is an industry that has stored away so much excess profit that it now sits on more surplus than at any time in history – a record level of well over $800 billion.”…

“Social inflation is a hoax,” Mr. Hunter said.

Joanne Doroshow, executive director of the Center for Justice and Democracy, said while the industry has blamed high jury awards for the hardening market, jury verdicts are rare, accounting for resolution of just 2% of tort cases. 

She said large outlier verdicts make the news, but are almost never fully paid after they are cut down by judges or on appeal or, typically, settled for smaller amounts.  

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