North American insurers are confronting a structural, not cyclical, shift in claims costs as social inflation, medical inflation, catastrophe losses, economic volatility and rapid AI adoption converge, according to Gallagher Bassett’s 2026 Carrier Perspective: Claims Insights report.
The study, based on responses from 250 carrier and MGA leaders in North America, the UK and Australia, found North American carriers feeling the effects more acutely than many peers, particularly on claims complexity, liability severity and workforce pressure.
Nearly two‑thirds (64%) of North American carriers reported rising claims complexity over the past 12 months, broadly in line with global responses. The impact is most pronounced in general liability, property and auto, where loss severity and litigation exposure have accelerated.
Legal and social trends are a central driver. Almost half of North American respondents (49%) cited social inflation and litigation pressures as major contributors to escalating claim severity. The report points to multimillion‑dollar verdicts, aggressive attorney advertising, anti‑corporate sentiment and the growing role of third‑party litigation funding (TPLF) as factors lengthening litigation timelines and pushing up settlement values.
Medical inflation remains the single biggest cost driver. Fifty‑six percent of North American carriers identified it as the key contributor to rising claims‑related costs. Drawing on Workers Compensation Research Institute data, the report notes that medical expenses now account for more than 60% of workers’ compensation costs in the US, with aging workers and increased attention to mental health adding to complexity and duration.
Catastrophe activity adds another layer. Gallagher Re figures cited in the report show preliminary global insured cat losses of $105 billion in the first nine months of 2025, the sixth consecutive year above $100 billion. Large US events, including the Los Angeles County fires, compounded pressures on already stretched claims teams.
To respond, North American carriers are leaning heavily on pricing and underwriting tools. Fifty‑eight percent (58%) said enhancing risk assessment and modeling is their primary strategy to counter social inflation. More than half reported increasing premium rates (54%), adjusting underwriting appetite (51%) and revising pricing models (51%).
Dynamic pricing models, often powered by AI, are being used to align premiums more closely with risk. For medical costs, AI‑driven predictive analytics (used by 76% of carriers) and fraud detection technology (71%) are now the top tools for managing trends, the report says.
At the same time, technology is creating new exposures. Forty‑two percent (42%) of North American carriers reported that AI and digital tools are being exploited for fraudulent activity, and 48% saw a rise in fraudulent or suspicious claims linked to AI‑generated documentation. More than half (54%) noted an increase in customer‑generated AI content in claim files.
Talent has emerged as the top‑ranked business challenge for North American carriers, with 18% naming attraction and retention as their primary concern. Claims management and adjusting, specialized case management and legal/compliance roles face the most acute shortages, directly affecting cost control and resolution times.
Economic and trade uncertainty is also feeding into underwriting behavior. Fifty‑nine percent (59%) of North American carriers said they have shifted underwriting strategies to manage trade‑related cost impacts, and 40% reported raising premiums in response to tariffs and supply chain disruption, particularly in manufacturing and logistics.
The findings pointed to a need to treat cost management as a core strategic capability rather than a back‑office function. Underwriting and pricing models will have to be recalibrated more frequently, with tighter feedback loops between claims, actuarial and product teams to keep pace with social inflation, medical trends and catastrophe experience.
Capital and reinsurance strategies are also in play: structurally higher severity and more volatile loss patterns may require revisiting retentions, aggregate protections and risk appetite in lines such as commercial auto, general liability and property. On the product side, pressure is likely to build for higher deductibles, narrower limits and more use of parametric and alternative dispute resolution mechanisms in hard‑hit segments.
In a more fragmented and data‑driven market, placement strategy, risk engineering and client education around realistic pricing, coverage expectations and the growing role of AI in both fraud and fraud detection are set to become increasingly important.
The report suggested that those organizations able to integrate predictive analytics, disciplined underwriting and proactive claims handling into a coherent, data‑driven framework will be better positioned to protect profitability and maintain coverage availability in a more volatile North American claims environment.
