Legal System Abuse Drives Surge in Liability Insurance Losses
A recent study by the Insurance Information Institute (Triple-I), known for its data and analysis on insurance issues, along with the Casualty Actuarial Society (CAS), a professional body for property and casualty actuaries, reveals the significant impact of legal system abuse (LSA) on liability insurance losses.
Study Findings on Financial Impact
The research estimates that LSA and related litigation trends contributed between $231.6 billion and $281.2 billion to the rise in liability insurance losses over the past ten years. This increase greatly exceeds what could be attributed to normal economic inflation.
Factors Increasing Costs
The study, titled The Impact of Increasing Inflation on Liability Insurance: 2015–2024, identifies several key factors driving higher claims and defense costs, including:
- Larger jury awards
- Litigation financing
- Changes in legal practices
These elements have affected multiple insurance lines such as personal auto, commercial auto, other liability – occurrence, and product liability – occurrence.
“This analysis illustrates that the severe spikes in liability insurance claims losses go well beyond normal economic inflation,” said Sean Kevelighan, CEO of Triple-I. “Legal system abuse, manifested through excessive verdicts and litigation behaviours, has fuelled a structural rise in claim costs that continues to increase costs for insurers and policyholders alike.”
Author's summary: Legal system abuse and evolving litigation practices have dramatically increased liability insurance losses over the past decade, far surpassing inflation-driven costs.