Debate continues over the drivers and potential solutions to address social inflation, which is currently outpacing economic inflation.
In 2024, there were 135 nuclear verdicts in the US with an average payout of $51 million.1 For insurers and reinsurers, these high-stakes cases are a key driver of claims severity, impacting how insurers manage reserves and adjust limits and pricing.
In June 2025, the Insurance Information Institute (Triple-I) and Munich Reinsurance America published a consumer guide detailing the three main ways social inflation — which insurers often describe as legal system abuse — impacts consumers and businesses across the US.
1. Sympathetic juries and societal trends
Some inputs into social inflation, such as changes in societal attitudes, are more difficult to calculate than claims severity. However, that doesn't diminish their impact.
As society has become more distrustful of large companies, juries are seeking to use the courtroom as a means of punishing corporate America for perceived wrongdoing.2
2. Legal system abuse and the billboard effect
Legal abuse refers to the use of tactics to manipulate the legal system. These tactics can include practices within the courts, such as delay tactics and jury anchoring, where attorneys set an inflated damages baseline as an "anchor" in the hope it will direct jurors toward determining a higher award.
Legal abuse also occurs outside the courtroom, such as through attorney advertising. This phenomenon is often referred to as the billboard effect, a term that describes how widespread and aggressive legal advertising can influence public perception, jury behavior and even the frequency of litigation. Its use is especially prevalent in the commercial auto and general liability markets, where annual attorney advertising currently exceeds $2.4 billion a year.1
3. Third-party litigation funding
Multimillion-dollar verdicts and settlements attract investors, including hedge funds and sovereign wealth funds. In turn, the availability of financial resources drives plaintiffs' attorneys to strive for even higher payouts, encouraging investors to evaluate cases based on their potential return.
Despite this level of influence, there's a general lack of transparency. Plaintiffs' lawyers aren't required to disclose that they're being funded by a third party or to identify the third party.
Moves to regulate litigation funding on both sides of the Atlantic
What is social inflation?
Colorado, Florida, Georgia, Kansas and Oklahoma are among the US states that have passed legislation to regulate litigation funding.
Florida offers an example of how such reforms can work. Until 2023, when significant tort reform went into effect, the state was a nuclear verdict hot spot. Since then, the numbers have declined, and Florida has gone from ranking second in dollars awarded in nuclear verdicts between 2009 and 2022 to ranking 10th in 2024.
In Europe, the European Commission is expected to propose legislation for the supervision of third-party litigation funding based on the findings of its newly published Mapping Report 3, which notes that "the absence of regulation creates a certain degree of confusion and uncertainty."
In the UK, the Civil Justice Council published its final report on litigation funding in June 2025.4 The report recommends "appropriate and proportionate regulation" that will ensure "third-party funding continues to support access to justice."
Lobbyists argue it will take more action to shift the dial on social inflation in the US, but the stage has been set for a broader response.
"By encouraging more responsible legal practices and clearer rules, these reforms aim to protect everyone and create a more balanced system for resolving disputes," says Stachura.
