Unpaid Claims, Not Litigation, Underlie Insurance Rate Increases, Advocate Says
The insurance industry’s economic cycles, rather than litigation against insurers, are a more significant factor in driving rate increases and non-renewals, according to a consumer advocacy organization. The Center for Justice & Democracy (CJD) at New York Law School is pushing back against insurance industry lobbying efforts that blame litigation for soaring premiums.
David A. Sampson, president and CEO of the American Property and Casualty Insurance Association (APCIA), addresses the association’s Executive Roundtable.
“Under the theory that the legal system has something to do with why hard markets kick in, one would have to believe that jury verdicts or trial lawyers have timed their ‘aggression’ or ‘abuse’ to precisely coincide with the insurance industry’s economic cycle,” said Joanne Doroshow, executive director of CJD, in an email response. CJD is a national consumer organization focused on safeguarding the civil justice system.
Doroshow pointed out that the current hard market cycle, characterized by rising rates, began in 2019 and “continued even through the pandemic, when courthouses were closed and there were no jury verdicts.”
A recent industry-sponsored survey indicated that 69% of a sample of 2,000 U.S. adults believe legal tactics such as third-party litigation financing and jury anchoring would increase the cost of home, auto, and business insurance. The survey was conducted by The Harris Poll and commissioned by the American Property and Casualty Insurance Association (APCIA) and Munich Reinsurance America.
In a June 2024 statement to the U.S. House Judiciary Subcommittee, APCIA asserted that “nuclear verdicts” against companies, where plaintiffs are awarded $10 million or more, create a “tort tax” of $1,424 per citizen and $3,681 per household annually.
In Florida and Georgia, insurance industry representatives have blamed litigation costs for problems with home insurance availability and affordability. However, the Florida legislature reversed its support for this idea in November 2024, according to the Tampa Bay Times.
Joanne Doroshow, executive director, Center for Justice & Democracy (CJD) at New York Law School.
In Louisiana, the state legislature passed four separate bills regarding lawsuits against insurers during the first half of 2024, addressing claim timeframes, the ability to sue out-of-state insurers, third-party funding of lawsuits, and settlement offer thresholds.
CJD’s Doroshow contends that lawsuits against insurers are often legitimate and not the result of legal system abuse, as critics within the industry claim. “No one wants to have to sue their insurance company. People sue because legitimate insurance claims are not being paid,” she said.
CJD published a 2020 study alleging the industry was misleading consumers in anticipation of an impending crisis of escalating rates. A 2023 study from the organization argued that industry criticism of nuclear verdicts and jury grievance reports “whitewash often egregious corporate malfeasance that led to these verdicts, dehumanize the experiences of those who have been hurt, and mock jurors who carefully make their decisions based on evidence presented by both sides of a case.”
Todd Greenbaum, president and CEO of Input 1
Todd Greenbaum, president and CEO of Input 1, a financial services company, believes that tort reform could influence insurance costs. “If lawsuits were handled in a more objective fashion… you would see a change in behavior,” Greenbaum said.
Greenbaum believes that tort reform could lead to a decrease in premiums. “The free market will drive this. There is no question that premiums will drop,” he said. “How long it will take, that’s another question.”
