Inflation Adds $4 Billion to Medical Malpractice Losses, Study Finds

October 13, 2025

The Doctor's Company (TDC) has released a comprehensive actuarial analysis titled How Inflation Is Impacting Medical Malpractice Claims, prepared by Moore Actuarial Consulting, LLC. The 2025 report builds upon earlier research published in 2023, offering a decade-long view of how both economic and social inflation have reshaped the physician-focused medical malpractice insurance market.
According to the report, inflationary pressures—ranging from macroeconomic cost increases to evolving jury behavior—added an estimated $4 billion in insured losses and expenses for physician-focused insurers during the decade ending in 2024. This represents 11 percent of booked losses and marks a $1.6 billion increase from the firm's prior study for the decade ending in 2021.
Inflation Trends and Methodology
Per the report, the analysis relies on industrywide annual statement data and metrics such as loss development factors (LDFs), which measure how losses mature over time. Rising LDFs, TDC said, are evidence of increasing inflation—economic, social, or both. While economic inflation remained modest through much of the 2010s, its sharp rise beginning in 2021, combined with continued social inflation, has pushed medical malpractice claim costs higher than anticipated.
Social inflation occurs when average claim amounts increase faster than the general inflation rate, often influenced by shifting juror attitudes, larger verdicts, and expanding liability concepts. According to TDC, this dynamic, coupled with pandemic-era disruptions and post-pandemic litigation backlogs, has led to more volatile claim development patterns and an uptick in both claim frequency and severity.
Evidence from National Practitioner Data Bank
The report incorporates more than 3 decades of data from the National Practitioner Data Bank (NPDB), adjusting for inflation to isolate social inflation effects. Even after economic inflation adjustments, TDC said the frequency of medical malpractice reports exceeding $2 million began to grow around 2014, paused during the pandemic years of 2020–2021, and then resumed its upward trend in 2023.
Analysis of report-level NPDB data showed that the percentage of claims exceeding $1 million increased from 1.9 percent in 1990 to 13.2 percent in 2023, while claims exceeding $2 million rose from 0.3 percent to 3.2 percent during the same period. After adjusting for inflation using the Consumer Price Index—Medical Care, those ratios still reflected rising claim severity, indicating that social inflation—not just economic cost growth—is affecting outcomes.
The report also found that the share of total dollars paid on inflation-adjusted claims exceeding $2 million grew from 15 percent in 2013 to 24 percent in 2023, the highest proportion since the early-2000s malpractice crisis. TDC said these findings demonstrate that high-severity losses now account for a larger portion of the total indemnity burden, even when controlling for medical cost inflation.
Market Pressures and Underwriting Results
The study notes that rising inflationary effects have contributed to deteriorating underwriting results. According to TDC, data from the National Association of Insurance Commissioners (NAIC) show that medical malpractice insurers posted an underwriting loss of –10 percent of direct premiums earned in 2023, compared with losses of –8.2 percent in 2021 and –2.5 percent in 2022. This exceeds the 10-year average underwriting loss of –6.6 percent for the coverage line.
Premium rate increases have followed suit. Per the report, insurers filed for average rate hikes of 2.9 percent in 2024—ranging from 1.2 percent in states with liability caps to 4.5 percent in those without caps. Surveys cited by TDC indicate that nearly half of medical professionals reported rising malpractice premiums in 2024, compared with just 14 percent 6 years earlier.
Post-Pandemic Dynamics and Nuclear Verdicts
TDC said pandemic-era litigation delays temporarily muted claim frequency and severity, but the rebound in 2023 and 2024 has been pronounced. The frequency of high-dollar verdicts and settlements has surged, with the average of the top 50 medical malpractice verdicts increasing from $32 million in 2022 to $56 million in 2024. The report attributes this to both the catch-up of deferred cases and ongoing social inflation in jury awards and settlement expectations.
Third-Party Litigation Financing and Social Inflation Drivers
The report also explores third-party litigation financing (TPLF) as a growing contributor to social inflation. Under TPLF arrangements, private investors fund lawsuits in exchange for a portion of any eventual settlement or judgment. TDC said actuarial estimates suggest that TPLF could cost insurers between $13 billion and $25 billion over the next 5 years. The practice, while often confidential, is believed to contribute to higher settlement demands and longer litigation timelines.
Additional factors linked to social inflation include expanding legal interpretations of negligence, legislative rollbacks of tort reforms, retroactive statute-of-limitations extensions, increased plaintiff attorney advertising, and greater public sympathy for claimants. According to the report, each of these elements may play a role in the upward drift of claim costs beyond what economic indexes alone would predict.
Quantifying the Inflationary Effect
To estimate the financial impact of rising inflation, the actuarial analysis compared 2010 loss development patterns with 2024 results. TDC said that if loss emergence had followed 2010 patterns—before inflationary acceleration—ultimate losses and defense and cost containment expenses (DCC) would have been $4.9 billion lower. After adjusting for redundant reserves, the study concluded that inflation increased losses by approximately $4 billion, or 11 percent of booked totals across the period examined.
Broader Implications for Physicians and Insurers
According to TDC, these findings reinforce the need for continued vigilance across the healthcare liability sector. Inflation—both social and economic—is raising costs, eroding underwriting margins, and placing upward pressure on premiums. The report concludes that insurers, regulators, and legislators should closely monitor inflation's trajectory and its effect on claim severity to safeguard the stability of medical professional liability markets and maintain physician access to affordable coverage.
The study underscores that inflationary trends, if unaddressed, could further constrain risk-bearing capacity within the market and ultimately affect patient access to care.
October 13, 2025