Some say Litigation Finance is partly to blame for the latest round of insurance rate increases. Many speculate that an increase in the number of cases and award sizes have led to significant rate hikes.
An LFJ Conversation with Michael Kelley, Partner, Parker Poe
Some say Litigation Finance is partly to blame for the latest round of insurance rate increases. Many speculate that an increase in the number of cases and award sizes have led to significant rate hikes.
Business Insurance details that auto liability rates climbed about 11%, and general liability went up 6%. Excess liability, however, saw a staggering rate hike of between 50-160%. Some businesses that saw rate increases last year believed they’d be immune in 2021. Not so. Some policyholders who saw huge rate increases last year are still enduring 10-20% rate hikes this year.
In addition to the raising of rates, policies are more likely to include exclusions related to infectious disease. This obvious response to COVID means policyholders may not even be getting the protection they’re paying for. This is one of many factors that has led to the purchase of less coverage overall.
As policyholders deal with increased risk or losses, they face the possibility of being dropped by their incumbent insurers, leaving them without affordable options.
Why is Litigation Finance being touted as a reason for higher insurance rates? Third-party legal funding has been an instrumental part of class action cases for over a decade. Its influence continues to grow, as legal professionals come to appreciate its value. By increasing access to justice for those who can afford it least, litigation funding also increases accountability among insurers who may now have their feet held to the proverbial fire.
Perhaps in addition to raising rates, insurers can do more to ensure that their conduct doesn’t inspire a need for class actions. Negating the need to pursue litigation may be the best way to avoid paying a judgment.
