Steps to Combat Social Inflation
Claim defense and settlement costs continue to rise for K-12 schools, colleges, and universities. From 2015 through 2020, United Educators (UE) saw the average claim cost double for primary general liability (CGL) and educators legal liability (ELL). UE members are facing increased severity of claims of all types.
Sexual misconduct claims are of particular concern. Even excluding employment-related harassment and high-profile claims related to serial abusers, UE saw sexual misconduct claims grow three times faster than all other claims types over the last 15 years and comprised nearly 20% of all claims costs in 2020.
Social inflation and increased settlements affect all UE members, including independent K-12 schools.
“Social inflation” — the increase in insurer costs above general economic inflation — has had a significant impact over the past five to six years, drastically increasing the cost of claims.
Factors Driving Social Inflation
The main factors driving social inflation include institutional mistrust, a changing litigation environment, and increased legislative risk.
Public confidence has declined in education and other big institutions. Juries, who are more likely to be biased against institutions and their insurers, award large verdicts, either to punish the institution or due to the belief that the institution can afford it.
In courts, some plaintiff attorneys focus on underlying safety or security issues in a way that appeals to the jury’s survival instincts, a trial strategy known as the Reptile Theory. This approach plays on the idea of large institutions as bad actors and uncaring.
Third-party litigation funding is when hedge funds invest money into lawsuits in exchange for a percentage of the settlement or judgment. Funders, including foreign investors, are supporting their own interests, rather than the victims’.
In addition, many recent laws such as state reviver statutes provide an extended timeframe for claims to be filed many years after incidents occur, long after policies were written, and so attenuated from the incident that memories have faded, and records have been lost.
Take These Steps to Help Protect Your Institution
UE and our members must work as partners in addressing the rising cost of claims. Together, we can take steps to stay ahead of risks as they emerge and to respond thoughtfully when incidents occur. Here’s how.
Invest in Planning
Create a culture of risk management
You play a critical role fostering a risk management mindset across your campus, even if you don’t have a formal enterprise risk management (ERM) program. This means a comprehensive approach that includes working to help prevent risks, building your tower of insurance coverage, following your risk management policies and procedures, and partnering with us on claims resolution.
Draw upon our library of education-specific risk management resources, online learning, claims studies, and webinars, as well as our risk advisors, to help you plan ERM efforts. Our consultants are here to assist in providing personalized guidance, and our campus workshops can help you establish and implement an ERM program.
Collaborate with us on top risks
Risk management has never been more important as a set of actions institutions can take to prevent incidents or reduce the severity of those incidents that can’t be prevented.
With a singular focus on education and decades of claims experience, we have a deep engagement with our members and are committed to helping address your top risk concerns while intensifying our focus on risks resulting in high losses.
Top risk surveys at K-12 schools and in higher education indicated, in many instances, an overlap of our members’ top risk concerns and risks resulting in high financial losses. Members identified sexual misconduct and public safety (risks related to crime and safety for the campus community and guests) as common concerns and, therefore, opportunities for increased UE-member partnership.
Consider options for premium credits
We understand the value of having more control over your insurance costs and budget planning. There are several approaches you can explore to manage the costs of risk transfer.
Our Risk Management Premium Credit (RMPC) program encourages you to undertake a risk mitigation activity during your policy term. You can earn a premium credit of up to 6% upon renewal. Members invited to participate are required to address risks that drive common or significant losses related to a policy they place with UE.
Mitigation activities include conducting training, audits, policy review and development, and tabletop exercises, and risk management practices on high-loss topics such as workplace discrimination, sexual harassment, slips and falls, transportation, sexual misconduct, and risk transfer contracting.
Also consider options for increasing self-insured retentions or deductibles. This can be a means of helping you stabilize premiums and drive greater risk management focus on your campus. Members of all sizes are choosing to take this approach. Some elect to charge back a portion of the deductible or self-insured retention to individual departments or programs. This can be an effective way to encourage good risk management across your campus.
Prepare to Respond
Ready your crisis response
Our claims experience shows that an institution’s responses when bad things happen can seriously impact the likelihood and value of claims. A well-executed response by your school that considers all those impacted by a traumatic event can convey your community is caring and promote healing.
Keeping a cool head by following policies and protecting your institution, while also using a warm heart to bring compassion and empathy to the injured party is part of sound risk management.
We can help you increase readiness to manage a range of crises on and off campus. Our crisis response tabletop exercises enable you to assess response efforts in advance of a crisis, identify flaws or gaps in campus’ responses, and adjust as needed. In the event of a tragedy or crisis, our supplemental crisis response program, ProResponse® (available to eligible members), provides expert guidance to help your community recover.
Follow through on your procedures
Periodically review campus risk management practices to ensure your policies are being followed. Where policies are not followed, either evaluate and modify the policy as appropriate so it fits campus risk management practices or modify your practices so they support and enforce appropriate risk management policies.
Engage UE education claims professionals
One of your many member benefits is the support from our Resolutions team’s unique experience handling education claims. Our Cool Head, Warm Heart® philosophy means we bring a thoughtful, compassionate response to handling claims. At a time when the overall cost of claims — settlements, verdicts, and defense costs — are rising, UE strives to drive down loss experience.
Our expert Resolutions professionals focus solely on education claims, working collaboratively with defense counsel and your institution to help achieve the best result for all involved.
Recognizing that prolonged disputes demand resources from all parties, we craft strategies to explore early resolution without litigation and work collaboratively to develop good legal outcomes.
Remember the benefits of early reporting
Our members with ELL policies can receive pre-claim advice credit for early consultation with legal counsel on qualifying ELL circumstances. This is an opportunity to take advantage of our claims management expertise, including strategies to reduce the likelihood of claims.
We draw upon data analytics to help manage risks, mitigate claims, and avoid possible retaliation. Our jurisdictional knowledge and experienced defense counsel are essential to effective claims resolution. Our cost-effective approach includes using litigation management tools, case assessments, guidance on preparing proper documentation, early budget forecasting, and candid feedback.
Partnering with UE
UE has spent the past 35 years partnering with our member-owners. We remain committed to helping you grow robust and comprehensive risk management policies and programs. Our goal is to help you keep our communities safe, by providing practical risk management tools and learning opportunities, offering essential coverage you need, and resolving claims effectively.
Our partnership includes staying on top of current and developing trends and emerging risks and understanding how they might impact you.