As property and casualty insurers face rising costs and tightened market conditions, a Senate hearing Thursday suggested that litigation reform could be one of the few areas where the federal government may directly influence insurance affordability.
Testifying before the Senate Committee on Banking, Housing, and Urban Affairs, Robert Gordon, senior vice president of policy, research, and international at the American Property Casualty Insurance Association (APCIA), outlined how legal system abuse and excessive litigation have added financial pressure to the insurance sector.
While most insurance regulation falls under state authority—including pricing and coverage mandates—Gordon noted that litigation trends have a nationwide impact and present a clear area for federal legislative involvement.
He said that curbing certain litigation practices could reduce insurers’ anticipated losses, which in turn could help bring down premiums for consumers.
“While many of these problems must be resolved at the state level,” Gordon said, “there are ample opportunities for the federal government to enact changes related to litigation that will have a direct impact on lowering anticipated losses and subsequently insurance premiums.”
Gordon’s comments come amid concerns over insurance availability and cost, particularly in regions facing heightened climate-related risks. He identified multiple compounding factors—such as inflation in property repair costs, regulatory delays in rate approval, and mandated coverages—as contributors to poor underwriting results and limited capital growth across the industry.
APCIA maintains that private, competitive insurance markets supported by clear legal frameworks and efficient regulatory systems deliver better outcomes for consumers.
However, Gordon warned that government rate suppression, legal cost inflation, and expanding state insurance programs could distort the market and limit consumer choice.
“Government rate suppression, coverage mandates, state insurance funds displacing private markets, regulatory and infrastructure failures, and escalating inflation and legal costs disrupt markets and can make insurance decreasingly affordable and available,” he said.
APCIA reported that plaintiff lawyers spent over $2.4 billion in 2023 on legal services advertising, creating a hyper-litigious climate that burdens the insurance sector. Additionally, third-party litigation funding—where outside investors finance lawsuits in exchange for a portion of any settlements—has ballooned into a $15.2 billion industry in the US alone.
In Florida, House Bill 1179 was lauded by APCIA as a model effort. The legislation requires disclosure of litigation funders and restricts the influence of outside financiers in legal proceedings.
APCIA indicated it is willing to work with lawmakers from both parties to explore federal litigation-related reforms that could offer cost relief to consumers and reduce long-term fiscal exposure for taxpayers.
Could federal litigation reform help reduce your insurance premiums? Share your perspective in the comments.
