SOCIAL INFLATION IN MTPL INSURANCE
SOCIAL INFLATION IN MTPL INSURANCE

Summary/Abstract: The insurance industry is facing the negative effects of inflation in the post pandemic period. In addition to economic inflation, the insurance industry also faces the phenomenon of social inflation, i.e. abnormal growth of claims caused by various social factors. In this paper, we examine whether insurance companies in the Balkans face social inflation. We analyze the growth rate of motor third-party liability insurance claims in 11 countries of the region for the period 2011-2020, including a more detailed analysis of the insurance market in the Republic of North Macedonia. The results show that there is no systematic existence of social inflation, but occasional abnormal shifts are noticeable for certain countries in the region, especially EU countries, i.e. certain companies in the Republic of North Macedonia. In addition, we find that social inflation occurs in countries with a higher rule of law index, indicating that low institutional development and low trust in institutions potentially prevent the development of social inflation. The paper contributes to the current literature by analyzing the problem in an international context and in a new region, as well as producing recommendations for policy makers.

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