Factors Affecting Liability Claims Variability

Liability insurance provides an insured party with protection against claims resulting from injuries and damage to other people or property. Liability insurance policies cover any legal costs and payouts an insured party is responsible for if they are found legally liable. These claims represent a substantial liability for insurance companies, and they must be accurately predicted and reserved in order for an insurance company to remain profitable or even survive. In recent years a number of factors have caused liability claims to spike, to become more variable and less predictable. There is significant cost to the insurer is not accurately predicting these losses. Some internal variables within the claims and reserving process can lead to inaccurate reserving, but many factors such as social inflation (the growing emergence of litigation, litigation “investors”, higher jury awards); changes in legislation and regulation); rising healthcare costs, all affect the ability of insurers to accurate assess liability reserves for their financial statements and pricing of products. This project looks at both internal factors as well as external factors that would lead to spikes in liability claims reserves. This is a quantitative project and some actuaries will be needed for the team to do an analysis, but students who have an ability to take a big picture perspective, and understand larger social impacts and trends, would be particularly valuable on this team.


Country Financial Actuarial Department. Client Contact, David Elkins

Project Mentor

Jim Jones, Executive Director, Katie School of Insurance and Risk Management