Cooperative secretion of virulence factors by pathogens can lead to social conflict when cheating mutants exploit collective secretion, but do not contribute to it. If cheats outcompete cooperators within hosts, this can cause loss of virulence. Insect parasitic nematodes are important biocontrol tools that secrete a range of significant virulence factors. Critically, effective nematodes are hard to maintain without live passage, which can lead to virulence attenuation. Using experimental evolution, we tested whether social cheating might explain unstable virulence in the nematode Heterorhabditis floridensis by manipulating relatedness via multiplicity of infection (MOI), and the scale of competition. Passage at high MOI, which should reduce relatedness, led to loss of fitness: virulence and reproductive rate declined together and all eight independent lines suffered premature extinction. As theory predicts, relatedness treatments had more impact under stronger global competition. In contrast, low MOI passage led to more stable virulence and increased reproduction. Moreover, low MOI lineages showed a trade-off between virulence and reproduction, particularly for lines under stronger between-host competition. Overall, this study indicates that evolution of virulence theory is valuable for the culture of biocontrol agents: effective nematodes can be improved and maintained if passage methods mitigate possible social conflicts.