A new study from the Insurance Information Institute (Triple-I) and the Casualty Actuarial Society found that legal system abuse — such as excessive lawsuits and huge jury verdicts — has cost U.S. insurers between $231.6 billion and $281.2 billion in the past decade. No matter how it’s calculated, that’s an enormous number — and it ultimately affects what businesses and individuals pay for insurance.
What the Study Looked At:
Researchers reviewed four main types of insurance claims:
• Personal Auto Liability
• Commercial Auto Liability
• Other Liability (Occurrence)
• Product Liability (Occurrence)
Triple-I CEO Sean Kevelighan explained that these claim spikes are “well beyond normal economic inflation.” In other words, the increase in costs isn’t just because prices in general are going up — it’s because lawsuits are becoming more frequent and more expensive to fight.
The Numbers at a Glance:
Here’s how much legal system abuse added to losses in each category:
• Personal Liability: $91.6 to $102.3 billion
• Commercial Auto Liability: $52 to $70.8 billion
• Other Liability (Occurrence): $83.4 to $103.3 billion
• Product Liability (Occurrence): $4.6 to $4.8 billion
These increases represent anywhere from 9% to over 34% of total claim losses — a major jump.
Why Are Losses Rising?
According to co-author James Lynch, the number of insurance claims has actually gone down over the last decade — but the cost per claim has gone way up.
The main reason? Legal trends.
• Jury awards (so-called “nuclear verdicts”) have skyrocketed.
• Third-party litigation funding — when outside investors pay for lawsuits in exchange for a share of the settlement — has made it easier and more profitable to sue.
These factors have caused insurance losses to rise much faster than normal inflation rates measured by the Consumer Price Index (CPI).
What It Means for Policyholders: When insurers pay more in claim costs, those losses eventually impact everyone through higher premiums. The study is a reminder that legal system abuse doesn’t just hurt insurance companies — it raises costs for consumers, businesses, and the entire economy.
Source link: Insurance Business America
