What is Social Inflation?

• Social inflation refers to the rising expectations that people have for services, products, and compensation. Unlike hard asset inflation (e.g., rising gas or food prices), social inflation is more about how people expect more than they did in the past.

Examples of Social Inflation:

• Restaurants: Increased expectations for better service.
• Insurance Claims: Higher compensation demands, such as wanting a car to be replaced, not just repaired, and compensation for lost work due to the car being out of service.

Social Inflation in Medical Malpractice:

• Social inflation is also influencing medical malpractice claims, with individuals seeking more compensation than before, such as for lost wages or emotional distress, in addition to covering their medical needs.

Rising Expectations in Customer Service:

• We now expect faster delivery times and better customer service than ever before, with consumers demanding more results from products and services.

Impact on Businesses and Prices:

• Businesses may need to increase costs to meet higher expectations. For example, to meet demands for faster shipping, companies may offer overnight shipping, which raises prices for consumers.
• Medical service providers may have to allocate more resources to cover the costs of increased medical malpractice claims, which could affect the quality of care or increase overall costs.

The Spiral of Social Inflation:

• As companies raise prices to meet demands, they may also reduce their workforce or increase automation to cover the higher costs, potentially leading to a reduction in service quality or availability of jobs.

Consequences of Social Inflation:

• While higher demands may lead to improved services or quicker delivery, there are potential downsides, including increased prices and a shift in the labor force dynamics.

Your Thoughts on Social Inflation:

• Where do you notice social inflation in your life, whether as a consumer, a business owner, or a member of society? Are you seeing more demands for better service, faster answers, or increased compensation? What are the consequences of these higher expectations?