Legal system abuse is driving up costs for the insurance industry, according to a new consumer guide released by The Insurance Information Institute (Triple-I) and Munich Reinsurance America (Munich Re US).
The publication outlines how certain legal trends are contributing to higher insurance costs and increased financial pressure on households and businesses.
Titled A Consumer Guide: How Legal System Abuse Impacts You, the report discusses the growing role of attorney advertising, third-party litigation financing and jury award strategies as factors contributing to rising litigation costs. According to the report, these practices can delay settlements and reduce the share of awards that plaintiffs ultimately receive.
“Legal system abuse has driven up litigation expenses and costs, impacting businesses and consumers across the United States,” said Joshua Hackett, head of casualty at Munich Re US. “If left unchecked, these rising costs will continue to increase insurance premiums and limit coverage options.”
The guide estimates that litigation-related expenses contribute approximately $6,664 in additional yearly costs for the average family of four. It also attributes the loss of millions of jobs and billions in tort-related costs to what it describes as excessive legal system practices, particularly for small businesses.
Triple-I and Munich Re US also noted that while large legal settlements may appear beneficial to plaintiffs, the actual payouts can be significantly reduced by legal fees, third-party funding arrangements and related expenses.
“While billboard attorneys use exploitative advertisements promising big dollar settlements, the truth is consumers and business owners can be left with less money, sometimes substantially less than if the likes of third-party litigation financiers are involved,” said Triple-I CEO Sean Kevelighan.
The guide calls for greater transparency in third-party litigation financing and closer scrutiny of medical billing and legal advertising practices. It also encourages consumers to better understand how these trends can influence the overall cost of insurance. The organizations say increasing public awareness is an important step toward broader legal reform and improved financial outcomes for consumers.
