The Insurance Information Institute (Triple-I) has raised concerns about the impact of excessive litigation on rising auto insurance costs. According to a recent issues brief released by Triple-I, the rise in dangerous roads and driving conditions, coupled with economic costs, is being compounded by overzealous billboard attorneys. Sean Kevelighan, CEO of Triple-I, emphasized the need to address legal system abuse, stating, "The price of insurance is the effect, not the cause of risk, and there must be more work done to curb legal system abuse."

Plaintiff attorneys are employing aggressive marketing tactics to attract potential clients, often hinting at significant financial gains through various channels such as highway billboards, television ads, and social media. Dale Porfilio, Chief Insurance Officer at Triple-I, highlighted the lucrative nature of third-party litigation funding (TPLF), where investors can see returns exceeding 20%. This practice allows financiers to invest in lawsuits in exchange for a percentage of any settlement or judgment, contributing to the increase in litigation cases.

The state of Louisiana is particularly affected by legal system abuse, with costs amounting to over $1,100 per resident annually, as reported by the American Tort Reform Association (ATRA). Additionally, the Insurance Research Council (IRC) identified Louisiana as the least affordable state for both personal auto and homeowners insurance due to its challenging litigation environment.

In Florida, the situation is equally concerning, with a significant portion of homeowners' insurance lawsuits originating from the state. Florida's Office of Insurance Regulation revealed that despite accounting for only 15% of all U.S. homeowners' insurance claims, Florida sees nearly 71% of the nation's homeowners' insurance lawsuits. This imbalance has led to the state having the highest average property insurance premiums in the country, causing financial strain on insurers and policyholders alike.

To combat legal system abuse and attract new insurers to the market, Florida implemented new laws in the previous year. These efforts have resulted in the approval of seven new insurers by the state's insurance regulator, with Citizens Property Insurance Corp. transitioning nearly 300,000 policies to the private market. The goal is to encourage insurers to assume more risk in a more stable marketplace, following the departure or reduction of several carriers due to the excessive costs associated with legal defense.

As the insurance industry grapples with mounting challenges posed by legal system abuse, stakeholders are looking to regulatory reforms and increased transparency to address the root causes of rising auto insurance costs.