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Industry Trends

The Top 3 General Liability Trends of 2023

Much of the difficulties impacting general liability pricing continue, but insureds face challenges abound, with new trends affecting premium rates across the board. Has the market reached an inflection point?

January 27, 2023

As liability claims have continued to increase in frequency and severity, the general liability market has struggled to keep up. As a result, insureds face tighter terms, with potential rate increases and difficulties securing higher coverage limits. As we look ahead to 2023, could there be any relief in sight? How can organizations prepare to weather the storm?

“While we don’t have a crystal ball, many of these issues have proven themselves systemic that may worsen over time,” said Tim Buckley, General Liability & Umbrella/Excess Liability Product Manager at Safety National. “Unfortunately, due to the nature of general liability and how difficult it can be to assign accountability, it is best for insureds to continue to focus on controlling their total cost of insurance through the mitigation of these claims in the first place. Implementing good risk management practices can reduce overall risks. Developing and deploying early claim litigation review tactics with their insurance carrier and broker can help resolve claims expediently before becoming a target of a nuclear verdict.”

These three trends should be top of mind for all companies when planning for the year ahead.

1. Social Inflation

Extensive jury awards are continuously being normalized through media coverage, regularly desensitizing the public to these inflated figures. The outcome of this is reflected in an upward trend of massive payouts. These nuclear verdicts are often hard to predict now, with some reaching into the billions.

Furthering the issue is litigation funding, in which third-party funders provide capital for a plaintiff. In return, the third-party funders receive a portion of the plaintiff’s award. This type of private equity funding has become more prevalent in general liability cases. While lobby groups have attempted to push damage caps to combat large jury awards, there has been little progress. As a systemic issue, social inflation will likely be a long-term trend, worsening until legislation is passed.

2. Economic Inflation

A couple inflation drivers, like supply chain disruptions and demand for durable goods, may be easing. However, other items, like rising labor and medical costs, and energy prices, are still trending upwards. Inflation is typically a short-term issue, but most experts agree that current pricing increases could last for years. Due to the rising costs of claims payouts resulting from medical and social inflation, organizations may face increased premium costs. Higher limits requests and lower retentions may be used to offset these costs, but typically they only result in more costly claims.

3. Active Shooter Incidents

The recent Chesapeake, Virginia, Walmart shooting incident marked a first in liability claims, with multiple employees suing the company for negligent hiring and retention practices. These employees stated they had previously warned the employer of dangerous behavior. Could this set the trend for other organizations involved in similar incidents? With legislation regularly changing to protect against negligent hiring practices, insureds may not be as protected as previously thought.

Employers should continue to provide thorough background checks on new employees and verify all information provided. Additionally, company safety practices should include recordkeeping of erratic behavior and complaints, with appropriate and timely coaching and consequences, where applicable.