When Social Inflation Pushes the "Good Neighbor" Away: How Market Exit Behavior Triggers Brand Betrayal and Trust Erosion

Authors

• Waros Ngamsiriudom, University of North GeorgiaFollow
• Mohan Menon, University of North GeorgiaFollow
• Mitra Devkota, University of North GeorgiaFollow

Publication Date

2026

Abstract

Social inflation, marked by rising litigation severity, shifting jury attitudes, and expanding third-party litigation funding, has intensified financial pressures on insurers operating in disaster-prone markets. In response, many insurers have withdrawn or restricted coverage, creating a sharp disconnect between long-standing brand promises and current market behaviors. This article examines how these systemic pressures produce “brand betrayal,” a consumer perception arising when insurers’ market exit actions contradict their relational positioning as reliable, community-oriented partners. Drawing on signaling theory, relationship marketing, and institutional perspectives, the article develops a conceptual framework linking social inflation to brand trust erosion through market exit behavior. The analysis highlights the marketing consequences of insurer retrenchment and outlines strategies to mitigate trust loss in vulnerable markets. Implications for consumer welfare and future research directions are also discussed.