The Expert Podcast

…What is social inflation? We've all heard about. Inflation with gas prices food prices eggs costs You You know six bucks a dozen. Had a lettuce cost five bucks. That's inflation That's hard asset dollar cost inflation but what is social inflation Social inflation is a little bit different. It's a… More subtle expectation. Of what is due to a person meaning that when you have. An expectation of a service of a product. Of a compensation coming to you. That's higher than what it was before you have now inflated that expectation For example… If you are. If you go to a restaurant. Right. And you start expecting more service from that restaurant. You have now inflated. What your expectations are. If you have an insurance claim. And you now expect that. Your compensation from that insurance claim… Is more than what maybe you expected five years ago maybe if you crash your car or you think well I'll say fix my car Good enough That's that's fine. But now you might expect everything to be back the way it was new… And maybe compensation for the loss value of your car and compensation for your not being able to go to work while the car was out of service. This I'm not saying this right or wrong I'm just saying that people's expectations have gone higher, meaning that what you're going to demand from companies is higher. Here's an article from, casualty 360 where it talks about social inflation. Having higher costs. for medical malpractice.

When somebody sues for medical malpractice, they're not just suing for their damages and to fix their medical problem. Now they want other things on top of that Maybe lost wages maybe. higher compensation for, their troubles. Again not saying this is right or wrong. It's just that there's a social inflation where people want more things from whatever interaction they're involved with customer service. It could be. the speed of delivery maybe you want things shipped to you faster. We all. expect more. Tomorrow than we received the day before we expect that people are kind of treat us better. Tomorrow than they did yesterday. Th we expect that we're going to get more results from life because that's just the nature of, we always want more Right. And there's nothing wrong with that It's just that that social inflation. Will affect different things that will come back later It will be baked into things For example, if a company realizes look. To keep our customers happy We have to ship faster We have to get the product to that customer within one business day not four business days. So we have to do overnight shipping. So they're gonna have to take that cost and bake it into the price. So we're now if you're a customer that, Hey it really didn't matter if it gets there in a few days. You have to pay that extra price whether you like it or not because it's baked into the price, same thing with in this case medical malpractice, if you. R a. recipient of medical services. Through insurance or otherwise. You may find that you're not going to get the same level of care because…the care providers now have to provide more…resources for these medical malpractice cases.

Again they're not taking sides. It's just that it comes from somewhere, right And you might say well it should come from the profits of the company Well maybe it should. But what's happening is this social inflation Is gradually bumping up other things like it's increasing prices. Maybe it's also reducing workforce because if you have to spend more money. For this social inflation as a company, you might have to reduce workforce and automate some things Maybe use chat GPT to do some automation maybe use offshore. people So the social inflation is kind of like a a deepening spiral Once you do one part of it then it puts cost somewhere else. And it can add to their cost of a service but also it might reduce what goes into other things that are less tangible like workforce or employment. So what are your thoughts on social inflation Where does it show up in your life? As a consumer as a business. as just a member of society are you seeing. More higher demands from people for anything whether it's…faster answers more customer service. And is this really happening and are there consequences that are showing up that also offset some of these advantages?