Briefing: Social media harm is becoming a casualty accumulation risk

This journalist has long been suspicious of social media and its impact on the mental health of users – but material risks for the insurance sector related to this technology are now beginning to bubble to the surface.

By now the negative ramifications of overuse are well known, with scrolling for over three hours a day associated with higher risk of depression and anxiety, worse sleep and compulsive behaviours. 

But, as highlighted in seminal documentary The Social Dilemma (2020), social media users are not wholly to blame for this behaviour.

It is large social media companies, such as Facebook and Instagram owner Meta or TikTok owner ByteDance, that have made it their business to exploit human addiction pathways for profit by keeping users hooked.

And, on 25 March 2026 , the first wave of the coming storm struck the shore. In a court case from Los Angeles, California, Meta and Google were both found liable for intentionally building addictive social media platforms that harmed a 20-year-old’s mental health and were ordered to pay £4.5m in damages. 

This case is likely to be instructive for further litigation across the US, with hundreds of similar cases currently being heard in courts. And, importantly, where the US goes, the UK tends to follow. 

But why is this important for the (re)insurance industry? 

Casualty risk indicators

Casualty insurers underwrite general liability, products liability and errors and omissions policies for a range of the largest software companies. Were judgements to hold these firms liable, insurers may find themselves on the line for payouts to plaintiffs, as well as legal defence costs.

And, in a report published 27 March 2026, ratings agency Moody’s noted that litigation over the harm of addictive software presented “early signals for casualty risk”. 

Noting the impact that the recent rulings against Meta and Google may have, Moody’s explained: “The verdicts themselves are only an early data point. 

“The broader significance for insurers is what these outcomes suggest about where design-centred liability theories may go next, especially when AI-related technology is at their core, and how to manage emerging risks as technology and legal arguments both evolve.” 

As Moody’s explained, allegations in many legal cases focus not on social media as a category, but more on the decision to utilise design features selected to increase engagement by drawing on psychological, behavioural mechanisms in users. 

These algorithmic engagement optimisation decisions are not limited to social media either – and are common in a range of industries. 

Industries including gambling, video games, online retail and streaming services all utilise this technology and Moody’s Litigation Tracker tool has identified hundreds of cases across the US targeting these sectors. 

That this entirely modern issue is now showing up in the courts means that insurers can not rely on historical loss experience to capture the size and scope of the associated risk.

Moody’s explained: “Emerging casualty risks are often by-products of technological change, with exposure accumulating ahead of claims and legal validation.

”Identifying, monitoring and managing those risks requires forward-looking analytical approaches that reflect how new technologies could translate into liability through scientific discovery and legal innovation.” 

There is a real possibility that, as the world becomes increasingly aware of the harms originating from engagement manipulating software, this sort of litigation becomes an accumulation risk for the (re)insurance world. 

We certainly seem to be seeing the early indicators.