If you have noticed your worship facility’s insurance premiums rising recently, you’re not alone—across the insurance industry, premiums and deductibles have increased considerably. This article, the third in a three-part series on factors impacting insurance, focuses on social inflation.
What is social inflation?
If you haven’t heard the term “social inflation,” here’s a primer: It refers to how insurance companies’ claim costs are increasing above general economic inflation. The increased costs are associated with litigation in which plaintiffs are awarded ever-growing amounts from insurers – amounts that often exceed those specified in the insurance policy.
As plaintiffs ask for more and more in court, the cost inevitably trickles down to all insurance customers, resulting in higher costs.
According to the Insurance Information Institute, four big factors are contributing to social inflation in 2024:
- Third-party litigation funding (TPLF) – TPLF allows hedge funds, other financiers and governments to invest in a lawsuit in exchange for a percentage of the settlement or judgment. This type of financing contributes to inflated judgments and longer litigation. In 2022, the number of insurance cases litigated in federal court increased by 30%. During the same period the average duration of a case was 268 days in a district court and 307 days in an appellate court.
- Plaintiff attorney advertising – Plaintiffs’ attorneys spend billions of dollars every year in advertising—often on billboards—to entice those who think they have been wronged to bring their case to court. Those advertisements often promise plaintiffs high payouts. In the courtroom, attorneys have moved beyond emotional appeals to stoking anger at corporate defendants, encouraging an “us vs. them” mentality.
- Increasing plaintiff attorney contingency fees – Because attorneys are requiring a higher percentage of the total settlement or judgment, claimants need to increase the amount they are requesting. The third-party litigators, meanwhile, are profiting even more as well.
- Eroding caps on damages – There is very little limit on the amount plaintiffs can demand in the U.S. judicial system. As a result, settlements and case damage awards increased 27.5% on average between 2010 and 2019, according to the U.S. Chamber Institute for Legal Reform.
What can you do about social inflation?
Social inflation is much more of a societal problem than an individual issue. Therefore, as a single house of worship, you alone cannot influence its effect on the costs of insurance.
However, you can take important steps to protect your organization. Working together as a congregation, mount an effective risk management campaign and establish key processes and required actions. If you work hard to minimize any incidents that could lead to an insurance claim, you will avoid deductible costs and disruption of your ministry. You could also help control the cost of future premiums.
Some of the main areas where you can manage your risk include:
Slip, trip and fall prevention
- Ensure walkways are kept free of clutter and debris, and develop processes to ensure they remain clear. In cold weather states, have a plan in place for promptly clearing snow and ice from parking lots and walking surfaces.
- Take efforts to cover extension cords with cord concealers or cable ties near heavily trafficked walkways.
- Develop processes to monitor, cordon off and clean all spills and wet areas.
- Make sure that ladders and step stools are in good working order and inspected before each use.
- Ensure walkways and stairwells are well lit, and changes in elevation are marked with reflective tape or bright paint. Handrails should be provided on stairways with four or more steps and should be inspected to make sure they are secure.
Security and crime prevention
- Be aware of potential threats to your house of worship. Note activities such as vandalism and loitering that may indicate the presence of a greater threat.
- Ask your local law enforcement to participate in security and violence prevention planning with your congregation. Invite law enforcement to regularly patrol your property throughout the week.
- Limit and monitor your entrance points when people are present. For example, during worship services, make sure someone is monitoring the doors at all times.
- Complete criminal background checks for all employees and volunteers—especially those who will be working with children.
- Keep your grounds and entrances well lit, and regularly inspect, maintain and repair
all lighting.
Cybersecurity
- Create a written Internet Use and Access Policy and provide policy training to all staff and volunteers.
- Keep software and apps on all internet-connected systems up to date and delete unused apps to reduce the risk of infection from malware or ransomware.
- Require permission to access your Wi-Fi network and do not broadcast your network name or password.
- Allow system and device access only to those who have been approved.
- Prepare for an attack by reviewing and evaluating the vulnerability of all computer-related systems within your organization.
Injury and illness prevention
- Implement an Injury and Illness Prevention Plan (IIPP) designed to decrease injuries and illness, improve employee morale, and increase productivity.
- Establish a safety committee that meets regularly to discuss worker safety, near-miss injuries, workers’ compensation claims, hazard assessments and safety program updates.
- Regularly assess your facilities to identify hazards and design specific safety training for employees to address those hazards.
- Investigate the five Ws (who, what, where, when and why) of injuries that occur to determine the root cause and identify necessary interventions to prevent
future occurrences. - Carefully document safety trainings, accident investigations and hazard assessments for at least two years to provide a view of prior assessments, training and accidents for analysis.
Social inflation continues to be a challenge across all different types of insurance, and it may get worse before it gets better. The safer and more careful you are, the less likely you are to need to file a claim. If your insurance company considers you to be low risk, that could have a major impact on premiums, terms and conditions.
About the author
Pam Rushing, CPCU, is President – Subsidiaries and Chief Underwriting Officer, Church Mutual Insurance Company, S.I. (a Stock Insurer).