Macroeconomic Indicators Vol V, Issue 1

In this Section

Affordability is THE Defining Economic Issue of 2026
Social Inflation Continues To Reshape Risk — And Raise The Stakes For Insurance Brokers
Shifting From “promise To Pay” To “promise To Help” – What Brokers Need To Know

Affordability is THE Defining Economic Issue of 2026

“Affordability” has moved to the center of U.S. economic and political conversations this year. While the topline economy looks strong — steady gross domestic product (GDP) growth, moderating inflation, solid corporate performance — millions of Americans feel increasingly squeezed by rising costs and stagnant financial breathing room.

Here’s what’s driving the challenge of affordability.

Strong growth but households struggle with essentials

Despite steady GDP growth, many Americans are still struggling to pay their bills. Inflation has cooled into the mid-2% range, yet costs for essentials are meaningfully elevated compared to pre‑pandemic baselines.

Looking at price changes over the past year, energy services, which include electricity and natural gas, experienced the highest price increases. Car repairs and housing also topped the list. Housing affordability remains strained due to limited supply and elevated mortgage costs.

In fact, housing is where the affordability crisis feels most acute for many Americans, especially younger households. Mortgage rates haven’t fallen enough for many would-be buyers, with average prices of U.S. homes coming in at roughly five times the median household income.¹

Other factors adding pressure

While daily living costs remain major pain points, there are other factors causing affordability concerns. The softening job market is just another factor adding financial pressure. Despite relatively low unemployment of about 4.3%,² a series of high-profile layoff announcements by companies like Amazon, General Motors, and UPS has kept job security top of mind.³ Moreover, wage gains have not fully compensated for the last several years of price increases, especially for lower income households. Job searches are also taking longer: the median duration of unemployment rose to 11.1 weeks in January (from 9.1 weeks a year earlier), and the share of long-term unemployed (27+ weeks) increased to 25%.⁴

Additionally, higher household debts (credit cards, auto loans, mortgages) mean even small downturns hit harder while tariffs continue to raise the price of imported goods, with effects still trickling down to consumers.

Affordability spotlight: insurance

Affordability in the insurance industry is strained by a combination of climate driven risks, geopolitical instability, and rising operational costs. Climate change has become a major force reshaping global risk, increasing the frequency and severity of disasters and driving up expected losses for insurers — costs that ultimately flow through to consumers in the form of higher premiums. As seen in the chart below, personal line rates have risen steadily for the past three years. As insurance premiums rise, the overall cost of homeownership increases, narrowing the group of buyers who can afford the payment.

In high risk states like Florida, Louisiana, and California, homeowners’ insurance premiums have risen exponentially over the past five years, driven by repeated hurricanes and wildfires. However, insurance challenges are spreading across the country, too, as losses from hailstorms and other severe weather rise. Nationally, home insurance premiums increased 8% faster than overall inflation between 2018 and 2022, according to data from the U.S. Treasury Department.⁵

Geopolitical tensions and supply chain disruptions also add pressure, contributing to rising commercial insurance costs that filter down into consumer prices. Overall, insurance affordability challenges are being driven less by traditional market cycles and more by a world that is structurally riskier, forcing insurers to reprice coverage in ways that households and businesses increasingly feel.

Looking ahead

In effect, affordability is becoming a lens through which Americans interpret the entire economy. While projections differ, most economists agree that affordability concerns are unlikely to ease quickly. Upcoming inflation readings and wage data will offer a clearer view of whether consumers can expect meaningful relief. Affordability for the average household will remain one of the top voter concerns leading up to the November midterms.

Contributions to this article by: Dani Zhelezova, Vice President, Business Intelligence, MarshBerry

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The concept of “social inflation” has been around for about a half-century now, and while the phenomenon is nothing new, there are fresh issues facing the insurance industry.

What is social inflation?

Similar to economic inflation, social inflation refers to a rise in costs. But while economic inflation describes an increase in costs across the board, social inflation refers to the rising costs associated with societal trends, legal-system dynamics, and cultural attitudes. For insurance brokers in particular, social inflation is not a background trend. It is an ongoing phenomenon that speeds and slows (just like economic inflation), directly impacting the cost of claims and thereby premiums, carrier appetite, underwriting scrutiny, and insured exposure.

The factors contributing to social inflation are not secret: Nuclear verdicts (often resulting from fear-based trial tactics), litigation funding, evolving (and expanding) theories of liability, and negative public sentiment toward corporations are the key contributors to this phenomenon. Some examples of social inflation drivers include:

Jury awards exceeding $10 million have increased significantly in the past decade, particularly in casualty and liability lines.¹
Third-party investors now finance lawsuits in exchange for a portion of settlements, increasing the volume and aggressiveness of claims.²
Courts and plaintiffs’ attorneys are broadening definitions of negligence and corporate responsibility.
At the same time, trial tactics that appeal to jurors’ fears and community safety instincts often drive higher verdicts — and plaintiff’s attorneys use this to their advantage.³
Social narratives increasingly frame companies as “bad guys” with “deep pockets,” which influences jury behavior.

The result is an environment in which severity of claims is rising faster than actuarial expectations across several lines of business.Commercial auto and excess liability have experienced persistent rate increases driven by rising claim severity.⁴ And reinsurers, facing large losses from nuclear verdicts, have increased their pricing and tightened terms.⁵

The most recent data on corporate nuclear verdicts is from 2024 and shows that $31.3 billion was awarded across 135 lawsuits against corporate defendants. Most of these were driven by product liability, intellectual capital and motor vehicle accidents.

New factors affecting social inflation

Two accelerants are making today’s social inflation feel meaningfully different from earlier cycles: social media and AI. Social media has changed the jury ecosystem. Outrage travels faster than facts, and narratives about corporate “greed” or “recklessness” can be amplified exponentially — creating a cultural baseline where outsized awards feel normal. Market observers have noted that traditional and social media can reinforce these sentiments and normalize very large verdicts.

AI is adding a second layer by lowering the cost and increasing the sophistication of both claim manipulation and litigation leverage. Deepfakes and AI-assisted document/image manipulation can increase the volume of questionable submissions and complicate investigations — raising frictional costs and pushing more matters toward dispute, defense spend, and settlement. Swiss Re has highlighted growing use of deepfakes and AI-enabled manipulation in insurance fraud, including altered images, videos, and documents, which increases the burden on claims handling and verification.⁶

Social inflation considerations for insurance brokers

While social inflation directly impacts carriers and insureds, brokers can also be impacted.

As verdicts grow, plaintiffs increasingly scrutinize insurance program design. Brokers may be drawn into litigation alleging inadequate limits recommendations, failure to advise on umbrella or excess structures, or improper risk transfer guidance. The bottom line: when payouts escalate, defendants scramble for any and all recovery sources — including advisors.

Coverage adequacy pressure is another social inflation-related phenomenon that is unique to the insurance broking industry.Clients often resist premium increases without understanding the social inflation drivers behind them. If brokers cannot clearly explain why limits must rise or why umbrella layers are tightening, they risk relationship strain and potential errors and omissions (E&O) vulnerability. At the same time, social inflation can bring volatility to the insurance marketplace, resulting in higher deductibles, reduced capacity, stricter underwriting and expanded coverage exclusions as well as increased retentions.

Throughout all of this, brokers must navigate shrinking carrier appetite while preserving client protection.

Opportunities presented by social inflation

While social inflation creates pressure, it also opens up opportunities. In a world of headline verdicts and public litigation narratives, brokers are expected to be proactive strategic advisors — not reactive policy placers. These increased client advisory expectations are actually a good thing because they help raise the role of broker from “rate explainer” to risk strategist. Underwriters are demanding stronger risk management controls and more detailed submission data before deploying excess capacity. Only brokers can provide that. In addition, brokers can design layered towers and alternative risk structures, elevating conversations beyond premiums into enterprise risk resilience.

In a socially inflating world, the broker’s role expands — not contracts. Brokers who master it can differentiate themselves as indispensable strategic partners.

Contributions to this article by: Pete Kampf, Vice President, MarshBerry.

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Shifting From “promise To Pay” To “promise To Help” – What Brokers Need To Know

Instacart, Uber, and Amazon have shaped modern consumers’ expectations for speed, personalization, and ease. Clients who are used to real-time updates, frictionless digital experiences, and proactive service now expect the same standard from their insurance partners — including their brokers.

This evolution is pushing the industry from a traditional “promise to pay” model toward a more modern “promise to help” approach, where preventing risk and guiding clients proactively matters as much as paying claims after the fact.

The insurance industry is evolving

This “promise to help” shift refers to a fundamental transformation in how service-based industries engage with their customers. Traditionally, the insurer’s primary obligation has been to cover financial losses following a specific event. Today, particularly in the health and car insurance sectors, more carriers are offering a model where instead of just compensating for loss, they offer incentives to reduce risk and prevent illness or damage. For example, many health insurance carriers are offering discounts to clients who use wearables to monitor their health, and auto insurers use telematics to provide real-time driving feedback, helping customers avoid accidents rather than just paying for repairs.

But it’s not just about reducing risks, it’s also about being more empathetic to client needs and concerns. Blue Shield of California provides Promising Start kits full of essential supplies to expectant parents before their baby’s due date. Some property insurers offer smart sensors to alert clients to property vulnerabilities, like fire risks, making homeowners and business owners feel secure and protected. For brokers, this shift represents a powerful opportunity to guide clients through this new ecosystem, help them take advantage of emerging tools, and deliver a more protective, advisory led experience.

How brokers are implementing this shift

Clients still value digital tools for routine tasks — ID cards, payments, document access — but when it comes to risk decisions, coverage clarity, and moments of vulnerability, brokers remain the trusted advisor. The “promise to help” is about deepening that trust with proactive, year-round engagement.

Here’s how brokerage firms can implement this shift:

Revise business and operating models: Brokerage firmsmust shift from a process-driven operating model to a more ‑customer preference model. This might mean redesigning customer journeys (renewals, onboarding, mid‑term changes), removing friction from each touchpoint and aligning systems and teams to serve journeys holistically instead of by department.
Make changes to corporate culture: Designing solutions and experiences that customers really want involves making a company-wide shift to transition from “transactional intermediaries” to “strategic risk partners.” Ensure teams have the procedures, platforms, and knowledge to make client interactions feel personal rather than transactional. For example, coach producers and account managers to use insights rather than transaction details to start conversations.
Enhance human and technological resources: Investments in people and technology can facilitate positive touchpoints beyond the point of purchase and submission of claims, which may lead to account-rounding opportunities.
Increase involvement in partnerships: Collaboration with other industries, such as healthcare and technology, can help firms offer clients holistic support. Some brokers are forming partnerships with home repair companies, wellness platforms, roadside assistance services, or app developers.
Implement risk management programs: Does the firm offer fleet management training, loss control resources or insurance sponsored programs like water and electrical sensors? The more a business helps clients prevent the claim from happening, the more they will value the firm’s input.
Gather and analyze data: Firms that use advanced analyticsto understand customer behavior and provide personalized, timely interventions will see the most rewards from the “promise to help” approach. Data and AI can drive more insightful client metrics, which in turn create predictive retention models, personalized communication engines, or automated QA on service calls.

Above all, be there when it matters most. When a claim happens, how does the firm react? Does someone from the firm physically show up to support clients during large losses? Does someone assist in the claims process? Are there dedicated people to review the coverage and work with the insurance carrier? All of these help the customer to save time and make sure the situation is handled properly the first time.

Benefits of a “promise to help” approach

Putting clients first isn’t just about being charitable, it’s a sound business strategy. Consider how a modern, holistic experience can differentiate a business and enhance client loyalty. That loyalty in turn leads to retention and increases profitable growth.In addition, some business lines are unsure about their coverage needs or risk profile, so this approach can open up new conversations that may help increase your book of business. Expanding from standard services to more tailored products may create new revenue streams and diversified earnings.

The “promise to help” strategy can also strengthen relationships with carriers who appreciate a focus on risk prevention instead of just paying out claims post-incident. As business grows, carriers might be more willing to create a special program for brokers who generate a significant amount of revenue. Bringing the “promise to help” approach to industry relationships can foster more business while also shifting the perception of the broker to someone who provides strategic guidance that is differentiated by both service and expertise.

Purchasing insurance isn’t as simple as clicking “add to cart.” Clients rely on their broker to be a clinical, financial, and risk management guide — someone who can interpret complexity, reduce anxiety, and advocate for them at every stage. In a world where speed and personalization are expected, the new benchmark is no longer how quickly a broker responds, but how quickly a client feels confident in their guidance. The brokerage firms that embrace the “promise to help” path will not only meet modern expectations — they’ll elevate their role as indispensable strategic partners.

Contributions to this article by: Keith Captain, President of FirstChoice, a MarshBerry Company.