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Facts + Statistics: Product liability

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Product liability insurance

Product liability insurance protects the manufacturer, distributor, or seller of a product from legal liability resulting from a defective condition that caused personal injury or damage associated with the use of the product. Product recall insurance, a specialty product designed to cover the costs associated with recalls, is also available from some insurers.

Product Liability Insurance, 2014-2023

($000)

Year Net premiums
written (1)		 Annual percent
change		 Combined
ratio (2)		 Annual point
change (3)
2014 $2,674,183 -1.6% 134.4 -20.9 pts.
2015 2,796,761 4.6 130.6 -3.7
2016 2,422,721 -13.4 124.1 -6.5
2017 2,689,115 11.0 102.1 -22.0
2018 2,794,716 3.9 122.3 20.2
2019 3,017,099 8.0 108.5 -13.8
2020 3,239,063 7.4 88.2 -20.3
2021 3,561,024 9.9 100.5 12.2
2022 4,295,605 20.6 89.5 -11.0
2023 4,444,481 3.5 99.9 10.4

(1) After reinsurance transactions, excludes state funds.   
(2) After dividends to policyholders. A drop in the combined ratio represents an improvement; an increase represents a deterioration.
(3) Calculated from unrounded data.

Source: NAIC data, sourced from S&P Global Market Intelligence, Insurance Information Institute.

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Insurers' legal defense costs

Most lawsuits do not go all the way to trial. Of those that are tried and proceed to verdict, Jury Verdict Research data from Thomson Reuters displayed in the chart below, show the median and average personal injury jury awards by type of liability.

 

 

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Trends In Personal Injury Lawsuits, 2014-2020 (1)

 

Year  Award median  Probability range (2) Award range  Award mean 
2014 75,000  $16,000 - $400,000 $1 - $172,061,728 $1,031,742
2015 88,689 20,000  - 493,094 1  -  88,246,000 1,134,864
2016 100,000 23,000 - 529,485 1 - 115,000,000 1,354,355
2017 125,000 21,390 - 648,469 1 - 160,500,000 1,812,681
2018 100,474 22,052 - 550,125  1 - 247,000,000  1,675,013
2019 95,677 20,450 - 517,060 1 - 740,000,000 1,758,308
2020 125,366 25,072 - 613,130 840 - 373,763,109 2,448,978
Overall $100,000 $20,000 - $505,000  $1 - $740,000,000  $1,479,368

(1) Excludes punitive damages.
(2) The middle 50 percent of all awards arranged in ascending order, 25 percent above and below the median award. The median represents the midpoint jury award. Half of the awards are above the median and half are below. This helps establish where awards tend to cluster.

Source: Reprinted with permission of Thomson Reuters, Current Award Trends in Personal Injury, 61st edition.

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Insurers are required to defend their policyholders against lawsuits. The costs of settling a claim are reported on insurers’ financial statements as defense and cost containment expenses incurred. These expenses include defense, litigation and medical cost containment. Expenditures for surveillance, litigation management and fees for appraisers, private investigators, hearing representatives and fraud investigators are included. In addition, attorney legal fees may be incurred owing to a duty to defend, even when coverage does not exist, because attorneys must be hired to issue opinions about coverage. Insurers’ defense costs as a percentage of incurred losses are relatively high in lines such as product liability and medical malpractice, reflecting the high cost of defending certain types of lawsuits, such as medical injury cases and class actions against pharmaceutical companies.

Defense Costs and Cost Containment Expenses as a Percent of Incurred Losses, 2021-2023 (1)

($000)

  2021 2022 2023
  Amount As a percent
of incurred losses		 Amount As a percent
of incurred losses		 Amount As a percent
of incurred losses
Product liability $713,268 46.6% $751,333 46.2% $869,370 40.8%
Medical professional liability 1,969,451 36.7 1,943,401 35.3 2,205,636 35.7
Commercial multiple peril (2) 2,272,853 30.0 2,248,506 22.2 2,724,149 25.5
Other liability 6,945,720 15.9 7,093,556 13.7 8,332,174 14.8
Workers compensation 2,593,464 12.3 2,975,641 13.9 3,085,693 14.3
Commercial auto liability 2,146,754 10.2 2,462,641 9.4 2,955,885 9.8
Private passenger auto liability 5,378,307 5.6 5,947,243 5.0 6,270,745 5.0
All liability lines $22,019,817 11.3% $23,422,321 10.0% $26,443,652 10.4%

(1) Net of reinsurance, excluding state funds.
(2) Liability portion only.

Source: NAIC data, sourced from S&P Global Market Intelligence, Insurance Information Institute.

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