The Insurance Information Institute announced that excessive litigation is contributing to rising auto insurance costs and leading to higher premiums. The announcement follows the release of an issues brief by the organization, which identifies legal system abuse as a significant factor affecting policyholders nationwide.
The report states that increased legal advertising and lawsuit activity are raising claim severity and settlement costs, which are then passed on to consumers. It also highlights third-party litigation funding as a factor creating financial incentives for more claims, adding pressure on insurers and premiums, according to the Insurance Information Institute’s press release.
According to the same report, insurers paid out more than $1.10 in claims and expenses for every $1 collected in premiums in the prior year. This loss ratio is attributed to factors including legal costs, medical inflation, and larger jury awards, particularly in states with high claim frequency and regulatory complexity such as New Jersey.
Separate industry analysis estimates that excess litigation in motor vehicle cases added about $42.8 billion in costs between 2014 and 2023. These costs are reflected in higher premiums, with states experiencing higher litigation activity and claim severity tending to see above-average insurance rates, according to Insurance Business Magazine.
The Insurance Information Institute was founded in 1960 and is headquartered in New York City. It provides data-driven research and analysis on insurance markets, risk trends, and public policy. The organization supports stakeholders including consumers, media, and policymakers by providing resources in English and Spanish through its official website. It represents more than 50 insurance company members—including regional, national, and global carriers—and aims to educate various audiences about risk and insurance through events, partnerships, its website, blog, and social media.
