A Practical Counterweight to Social Inflation and Legal System Abuse

This is the second installation of a three-part Risk Insider series examining weaknesses in the capacity of insurers to successfully control litigation and settlement costs. The series will include concepts devised to shore up those weaknesses and produce better results for consumers and shareholders.

Negotiation Is the Primary Control Point
Most litigated claims are still resolved through negotiation, making it the defense’s most durable point of influence in a volatile litigation environment.

As discussed in the first installment in this series, litigation value escalation is often framed as the product of external forces: nuclear verdicts, social inflation, and legal system abuse. That framing is incomplete. While those forces are real, they are ultimately filtered through negotiation outcomes. Negotiation is where expectations are set, narratives are tested, and value signals are sent to the market.

If negotiation weakens, inflation accelerates. If it strengthens, volatility can be contained.

The Quiet Erosion of Negotiation Capability
Negotiation skill has atrophied inside many claims organizations.

Modern claims environments reward speed, volume, and process. Under rising file counts and staffing constraints, negotiation preparation is often compressed or delegated to defense counsel. Insurance leaders bemoan a lack of “seasoned professionals” in that profession. Thus, planning in many cases is subordinated to reaction.

This skill atrophy is not intentional.  It occurs when negotiation is treated as something professionals will “pick up over time” rather than a capability that must be taught, reinforced, practiced, and aligned. It is relevant to know that only eight percent of outside counsel say they have ever received any formal training in negotiation.

The Plaintiff Bar’s Structural Advantage
Plaintiff firms increasingly negotiate with discipline, repetition, and systematized persuasion — while defense negotiation remains fragmented.

On the plaintiff side, assisted with AI tools, negotiation has become operationalized. Messaging is structured. Anchors are placed deliberately. Narrative framing is refined and reused. Technology reinforces consistency, ensuring that aggressive positions can be applied to maximum effect.

Defense negotiations, by contrast, often depend significantly on the defense team members involved, rather than shared frameworks. Outcomes vary based on who is handling the file, which defense firm is involved, and how much time was available to prepare. This asymmetry compounds over time and contributes directly to value escalation.

Why Weak Negotiation Discipline Fuels Inflation
Value inflation spreads when defense teams fail to establish credible reference points early and consistently.

Social inflation does not materialize all at once. It develops through repeated negotiations where exaggerated narratives go insufficiently challenged or where inconsistent outcomes reset expectations upward.

Two dynamics matter most:

• Narrative dominance: When the defense does not articulate a clear, evidence-based value story, the plaintiff narrative fills the void.
• Anchor drift: When similar claims resolve at materially different values without principled explanations, higher outcomes become informal benchmarks.

This is how value inflation becomes self-reinforcing.

Delegation Without Direction
Negotiation outcomes deteriorate when leadership responsibility is unclear between claims and defense counsel.

Many organizations rely heavily on defense counsel to manage negotiation. More than 50 percent of all file offers are now being conveyed by counsel. This is in spite of the fact that 70 percent of senior claim officers believe that claim professionals have more negotiation training than counsel.

That reliance is understandable, but problematic when negotiation ownership is ambiguous. When those roles are not explicitly aligned, negotiation posture fragments. A simple example is the issue of anchoring. While the predominant view expressed by counsel is that “there should never be a first offer before a reasonable demand,” 79% of claim executives believe that they’d benefit from making first-offers more often.

Even if counsel is conveying offers in the majority files now, the more critical question is “how.” Conveying a number is not negotiation.

Reinvesting in Negotiation as a Capability
Negotiation skill improves only when organizations treat it as a system and not an individual trait. We can learn this from the successes of plaintiff firms that do exactly that.

Reinvestment requires deliberate design:

Modern, relevant training for modern relevant negotiation
Focus on early positioning, evidence-backed advocacy and framing, mediator strategy, and written communication that survives repetition and scrutiny.

Mandatory preparation discipline
Before meaningful negotiations, teams should align on the core value story, defensible ranges, and concession logic.

Structured learning loops
Post-negotiation reviews should capture what worked, what failed, and what should change. This produces reusable insight, not just file notes.

Standardized support tools
Written frameworks and positioning templates reduce variability and elevate baseline performance across teams.

Meaningful measurement
Move beyond cycle time and closures. Track early positioning, anchor integrity, and consistency across comparable matters. And perhaps most importantly, track and understand the behavior of specific plaintiff firms.

The Challenge of Improving Negotiation at Scale
We must view technology as the tool that enables organizations to improve negotiation at scale.

The plaintiff bar’s adoption of AI, to support negotiations, issue demands, and frame narratives, is primarily dangerous because it supports persuasion at scale. Even small plaintiff firms, instead of working up one demand in a week, one lawyer can now work up 10 demands in a day. It’s not just that the work is good; it’s that the scale is enormous.

Even well-trained professionals cannot overcome systemic drift if negotiation quality cannot be improved at scale. The skills capability must be supported by structures that allow disciplined negotiation to repeat with consistency and accuracy across thousands of cases.  That will be the focus of the third installation in this series.

Actionable Next Steps

1. Run a negotiation capability audit
   Identify where negotiation posture depends on individual talent rather than organizational design. Are similar files producing vastly different results? Why?
2. Define negotiation leadership explicitly
   Clarify claims and counsel roles and reinforce them through file-handling expectations. Are negotiation philosophies aligned between claim professional and counsel? Does each even know what the other’s is? Ambiguity at the negotiation table produces inconsistency everywhere else.
3. Make preparation and learning standard work
   Institutionalize pre-event planning and post-event review so they survive workload pressure. How detailed are negotiation strategies on your files? Are there lists of defensibility points? Is the defense team willing to articulate and use them?
4. Measure negotiation quality, not just speed
   Add performance indicators tied to positioning, consistency, and value discipline.
   Organizations optimize what they track, and negotiation is driving the value on almost all but one percent of litigation of represented files. The range of structured, identifiable, data points is extensive. Initial offers and demands, timing and cadence, and deltas between milestone values and outcome values, are all easily retrieved.

Looking Ahead

Reinvesting in negotiation capability addresses one of the defense industry’s most overlooked vulnerabilities. In the third installation of this series, the focus turns to execution at scale — how technology, governance, and shared intelligence can help to control value inflation and inconsistent outcomes. &