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Tillinghast-Towers Perrin 2008 tort cost update



The insurance consulting organization, per its press release, "has issued its 2008 report, which measures tort costs for 2007 and shows trends dating back as far as 1950". It indicates that the cost of the liability insurance sector of the U.S. economy expanded by 2.1 percent in 2007, a slower rate than the 4.8 percent expansion of U.S. GDP as a whole. Because the data series tracks the size of the liability insurance market, its short-term movements tend to reflect the cyclical nature of long-tail liability insurance itself, in which "soft" and "hard" markets alternate, depending on such factors as the expected path of future payouts and the expected return on investments in the interim. The past few years have been a period of "soft" market conditions in which the cost index has grown at only a modest rate or even, as in 2006, dropped. More: ShopFloor, Business Insurance.

The Tillinghast studies are particularly useful in assessing long-term trends in liability-cost burdens (since long-term data will tend to transcend the vagaries of passing hard/soft markets) and in international comparisons (since well-defined liability insurance markets exist in other advanced countries and can be subjected to comparable metrics). Perhaps for those very reasons, and because the figures are widely acknowledged within the industry as having a high degree of accuracy in measuring what they set out to measure, the Tillinghast numbers have been furiously attacked by organized trial lawyers and their allies. For an introduction to this ultimately tiresome literature (unless watching the litigation lobby engage in nonstop misrepresentation is your idea of entertainment), see posts here, here, and here, as well as other past Point of Law coverage here.

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Rafael Mangual
Project Manager,
Legal Policy
rmangual@manhattan-institute.org

Katherine Lazarski
Manhattan Institute
klazarski@manhattan-institute.org

 

Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.