The Independent Insurance Agents & Brokers of America (Big “I”) has released a new resource aimed at helping independent insurance agents explain how legal system abuse contributes to rising insurance costs.
The Trusted Choice Legal System Abuse Toolkit is designed to assist agents in educating policyholders about the impact of frivolous lawsuits, inflated claims, and third-party litigation funding on insurance premiums and coverage.
According to the Big “I,” third-party litigation funding – where an investor finances a lawsuit in exchange for a share of the settlement – has become a growing contributor to increasing insurance expenses.
Many consumers, however, are unaware of the connection between such legal activity and their own insurance rates. A recent Trusted Choice survey found that nearly 60% of independent agents reported their clients did not understand how legal system abuse affects premiums, deductibles, or available coverage options.
Industry estimates suggest that legal system abuse is costing the US economy approximately $443 billion each year. This figure translates to an additional $3,600 in annual costs for the average American household. These costs are often passed along through higher premiums and increased operational expenses for insurers, compounding the financial burden on individuals and businesses.
The toolkit includes tip sheets, infographics, and prepared talking points to help agents break down the issue for customers. It also provides suggestions for how both agents and insureds can respond to the broader trend.
Big “I” president and CEO Charles Symington said that legal system abuse undermines the US court system and imposes costs on families and businesses.
“Few Americans know about how these predatory practices negatively impact their insurance rates. That's why it's so important for the independent agency channel to lead the way in educating their clients and communities about this issue, and the Big ‘I’ is providing the perfect resources to do just that."
The role of third-party litigation funding in fueling legal costs has been growing, with estimates placing the total value of litigation-related investments in the US at $15.2 billion in 2023. This influx of capital enables a greater volume of claims, often increasing the complexity and duration of legal proceedings.
Another contributing factor is the growing scale of legal advertising by plaintiffs’ firms. In 2023, these firms spent an estimated $2.4 billion on more than 26 million local legal services advertisements, marking a 5.7% increase over the previous year.
These ads often target potential claimants for mass tort or personal injury lawsuits, contributing to increased litigation volume and a broader awareness among consumers of potential financial incentives to pursue claims.
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