A new consumer guide from the Insurance Information Institute (Triple-I) and Munich Re sheds light on the growing impact of legal system abuse in the United States.
Titled "A Consumer Guide: How Legal System Abuse Impacts You," the report outlines the ways in which litigation tactics are driving up insurance and household costs for consumers and businesses.
The slideshow above illustrates four common tactics that insurance-industry leaders believe further legal system abuse in the U.S., according to Triple-I and Munich Re.
These tactics not only burden the economy with excessive tort costs, they also slow down settlements and diminish the actual awards received by plaintiffs, the report says.
It also provides data on the financial toll legal system abuse is taking on American families and the economy as a whole. Consider that:
- Legal system abuse causes $6,664 in added annual costs for the average American family of four;
- 4.8 million jobs have been lost in the U.S. economy as a result of excessive litigation; and
- More than $160 billion in annual tort costs land on small businesses.
The guide aims to dispel the myth that plaintiffs always derive a substantial benefit from large settlements. In reality, third-party investors and legal fees consume a sizable portion of lawsuit awards and settlements; sometimes more than half. Plaintiffs also may incur other costs such as medical expenses and case fees, which can further impact the final settlement they receive.
In response to the findings outlined in the guide, the insurance industry is calling for greater transparency in third-party litigation financing as well as steps to curb inflated medical billing and promote responsible legal advertising.
The Triple-I previoulsy called on insurance agents to help educate clients about the impact of legal system abuse. In a July 2024 blog post, the Triple-I offered the following advice for talking to insureds about the issue:
- Know your customers to understand their financial situation and coverage needs. Adequate coverage is an integral component of a strong financial management plan, and agents should be ready to point clients to pertinent resources.
- Be proactive in conversations about rising rates and help clients explore affordable coverage options that work with their budget. Explain that insurance rates rise for everyone due to more frequent claims and higher claims costs.
- Stay engaged with your client base to increase awareness of policy responsibilities and the pitfalls of legal system abuse. Use communication channels, such as e-newsletters, to share tips on avoiding scams and understanding agreements like assignments of benefits.
- Reach out proactively when you realize a client may have experienced an insurable event. Offer to answer questions and guide them through the claims process, reminding them that attorney and third-party involvement can significantly reduce their portion of any payout.
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