Tag Archives: Homeowners

Auto Insurance, Homeowners Insurance, Insurance Industry, Regulation, Risk Management

New Triple-I Issue Brief Puts the Spotlight on Georgia’s Insurance Affordability Crisis

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Insurance affordability in Georgia is dwindling as claim frequency and insurer costs soar, according to the latest issue brief from Insurance Information Institute (Triple-I), Trends and Insights: Georgia Insurance Affordability.  

Given the state’s below-average income vs. above-average insurance expenditures, Georgia ranks 42nd on the list of affordable states for homeowners insurance and 47th (plummeting from the 2006 high of 27th) for personal auto affordability, according to reports by the Insurance Research Council. This brief provides an overview of how several factors, including skyrocketing costs from litigation, pose risks to coverage affordability, availability, and other potential economic outcomes for Georgia residents. Tort reform is discussed as a legislative solution to the challenge of legal system abuse – excessive policyholder or plaintiff attorney practices that increase costs and time to settle insurance claims. 

The Georgia insurance market grapples with multiple risk factors 

From 1980–2024, Georgia was impacted by 134 confirmed weather/climate disaster events in which losses exceeded $1 billion each. At least 38 of those events happened in the last five years, with 14 in 2023. Homeowners in Georgia’s most climate-risk-vulnerable counties, such as the coastal and most southern parts of the state, can face double-digit premium hikes or nonrenewals. Also, data indicates the rate of underinsured motorists in Georgia is twice as high as the national average, and the rate of uninsured motorists is 25 percent higher. Injury claim severity in the state is slightly higher than in the rest of the country.   

Data indicates that litigation costs have become a pervasive concern for risk management. 

Rising claim frequency and litigation costs put coverage affordability and availability at risk. For example, the IRC findings across personal auto lines show a dual trend in Georgia of increased claims and litigation. Property damage liability claims per 100 insured vehicles are 15 percent higher, and relative body injury claims frequency is 60 percent higher. According to IRC, the rate for private passenger litigation in Georgia is nearly three times that in the median state. 

The Georgia Office of Commissioner of Insurance and Safety Fire (“OCI”) reviewed all lines across personal and commercial auto, personal and commercial umbrella, and commercial general liability (homeowners liability was excluded). The five-year average count for liability claims increased 24.9 percent (2014 – 2018 at 583,756 vs. 2019-2023 at 729,191). A rising percentage of claims with payment are full-limit claims, and the OCI analysis indicates litigation is driving that increase. While costs rose for both litigated and non-litigated claims, the number of claims with legal involvement dominated paid indemnity for most lines of business, and litigated claims comprised a growing portion of the total paid indemnity. 

Attorneys appear to have revved up their mining for lawsuits in Georgia. Law firms spent $160 million on advertising in Georgia, according to preliminary data from the American Tort Reform Association (ATRA). Outdoor ads for lawsuits increased by 119 percent in GA during that time. It might not be a surprise then to see that the Georgia OCI report shows legal (attorney involved) claims dominated Personal Auto claims for Bodily Injury, comprising 62 percent of claims and 86 percent of total indemnity paid for closed claims in Accident Year 2023. A review of losses of $1 million or more by accident year that have closed during the 2014 to 2023 period shows that each accident year cohort surpasses the count from the previous accident years.   

Recently introduced state tort reform legislation may help to stabilize insurance costs. 

Analysts estimate that litigation costs Georgia residents $880 million annually, or an average of $1,415 per resident.  Sean Kevelighan, Triple-I CEO, says “understanding how these trends drive up costs and identifying policy levers for tort reform legislation can ultimately bring positive outcomes for Georgia’s economy and its consumers and business owners.” 

As part of our commitment to educating stakeholders, Triple-I has launched a multi-faceted campaign to raise awareness of the mounting costs of legal system abuse in Georgia and other states. We invite you to view the video statement by our CEO Sean Kevelighan, interviews capturing the opinions of consumers about legal system abuse, and read the full issue brief, Trends and Insights: Georgia Insurance Affordability. 

Homeowners Insurance, Insurance Industry

New IRC report indicates that Most Homeowners Expect to Experience Severe Weather in Future and Feel Prepared. 

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While the perception of overall severe weather risks varies significantly by region, 65 percent of the participants nationwide believed their home is at risk from thunderstorms, according to the new report, Catastrophic Weather Events and Mitigation: Survey of Homeowners by the Insurance Research Council (IRC), a division of The Institutes. 

Overall, this and other key report findings revolve around the value of proactive measures for effective preparedness and mitigation strategies to address the increasing risks posed by severe weather events and the need for collaboration between homeowners, insurers, and governments to enhance resilience against natural disasters. The report highlights how interactions with contractors, public adjusters, and attorney involvement can significantly impact recovery timelines, claims frequency, and insurance costs. 

The online survey of over 1,500 respondents investigates U.S. public opinions and homeowners’ experiences with severe weather, offering insights on U.S. regional perceptions of future risks, preparedness levels, attitudes toward mitigation strategies, post-storm solicitations by contractors and service providers, and homeowners; opinions on the roles of insurance and government in managing severe weather-related risks.  

Disaster anticipation and preparedness 

Eighty percent of the responding homeowners expressed confidence in their preparedness for severe weather events. Homeowners participating in the survey who experienced severe weather events in the past five years were significantly more likely to believe that a similar event would occur within the next five years.  

Only 30 percent are aware of premium savings for implementing mitigation measures. However, Eighty-three percent of participants said they would consider implementing catastrophe preparedness and mitigation measures if it meant receiving savings on their insurance premiums, but most of those required premium savings large enough to offset the costs of these measures. Seventy percent revealed they would be willing to pay higher premiums for better protection against future severe weather events. Overall, 80 percent agreed that the government should provide emergency assistance.  

Weather Experiences 

Nearly half of the participants reported damage to their homes after a severe weather event. About 34 percent said they filed an insurance claim after experiencing damage to their homes, and 45 percent said they hired a contractor. Sixty-four percent of respondents reported receiving solicitation from contractors after a severe weather event. Also, 68 percent of participants who filed claims said they used Assignment of Benefits (AOB) to authorize the repair company to bill the insurance carrier. Fifty-four percent reported hiring public adjusters to handle repairs and insurance claims.  

For context, each year, there are about 100,000 thunderstorms in the U.S., about 10% of which reach severe levels, according to the National Oceanic and Atmospheric Administration (NOAA). Storms are classified as severe “ when containing one or more of the following: hail one inch or greater, winds gusting more than 50 knots (57.5 mph), or a tornado.” Data analysis from Munich Re indicates that by just the first six months of 2024, severe thunderstorms in the U.S. caused $45 billion in losses, $34 billion of which were insured, making 2024 the fourth-costliest thunderstorm year on record.  

Between 1980 and 2024 (as of November 1), the U.S. experienced 400 weather and climate disasters, with overall damage costs for each reaching or exceeding $1 billion. The cumulative cost for these 400 events exceeds $2.78 trillion. The yearly average for events during this period is 8.5, with the annual average for 2019 –2023 being 20.4. However, the U.S. experienced 28 events in 2023 and 27 events in 2024 costing at least 1 billion dollars each. 

Stakeholder Takeaways 

While climate risk plays a significant role in the number and severity of extreme weather events that cause insurance industry losses, Triple-I has kept an eye on the impact of the unpredictable confluence of attorney fee mechanisms, assignment of benefits (AOB), and other practices that can amplify claim costs. For example, involving third parties has the propensity to introduce the risk of claim inflation and may compound issues for the policyholder.  

When property owners are compelled to share their claim value (typically 30 – 40 percent to attorneys and 10 – 30 percent to public adjusters), this, in turn, may impact the final amount they feel necessary to settle a claim. Previous IRC research suggests that attorney involvement can increase claims costs and the time needed to resolve them (again, even while reducing value for claimants). Additionally, after a severe weather event, some exploitative actors can aggressively leverage assignment of benefits (AOBs) agreements to bill or even sue the insurer without further input from the policyholder. Policyholders lose the ability to work through and settle the claim efficiently. 

Triple-I and key insurance industry stakeholders define legal system abuse as policyholder or plaintiff attorney practices that increase costs and time to settle insurance claims, including situations when a disputed claim could have been fairly resolved without judicial intervention. Without measures such as regulatory intervention and increased policyholder awareness, coverage affordability and availability are at risk. Insurers, policyholders, and policymakers can take actionable steps to address the legal system’s impact on the cost of insurance. Triple-I remains committed to advancing the conversation and exploring actionable strategies with all stakeholders.  

To learn more, read this latest IRC report, our most recent brief on Legal System abuse, and follow our blog. 

Auto Insurance, Emerging Risks, Homeowners Insurance, Insurance Industry

New Triple-I Issue Brief Takes a Deep Dive into Legal System Abuse

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The increasing frequency and severity of claims costs beyond insurer expectations continue to threaten insurance coverage and affordability. Triple-I’s latest Issue Brief, Legal System Abuse – State of the Risk describes how trends in claims litigation can drive social inflation, leading to higher insurance premiums for policyholders and losses for insurers.

Key Takeaways

  • Insured losses continue to exceed expectations and surpass inflation, notably impacting coverage affordability and availability in Florida and Louisiana.
  • In promoting the term “legal system abuse”, Triple-I seeks to capture how litigation and related systemic trends amplify social inflation.
  • Progress has been made toward increased awareness about the risks of third-party litigation funding (TPLF), but more work is needed.

What we mean when we talk about legal system abuse

Legal system abuse occurs when policyholders, plaintiff attorneys, or other third parties use fraudulent or unnecessary tactics in pursuing an insurance claim payout, increasing the time and cost of settling insurance claims. These actions can include illegal maneuvers, such as claims inflation and frivolous or outright fraudulent claims. Unscrupulous contractors, for example, seek to profit from Assignment of Benefits (AOBs) by overstating repair costs and then filing lawsuits against the insurer – sometimes even without the homeowner’s knowledge. Filing a lawsuit to reap an outsized payout when it’s evident the claims process will likely provide a fair, reasonable, and timely claim settlement can also be considered legal system abuse.

The latest brief provides a round-up of several studies Triple-I and other organizations conducted on elements of these litigation trends. The report, “Impact of Increasing Inflation on Personal and Commercial Auto Liability Insurance,” describes the $96 billion to $105 billion increase in combined claim payouts for U.S. personal and commercial auto insurer liability. The Insurance Research Council highlighted the dire lack of affordability for personal auto and homeowners insurance coverage in Louisiana, along with the state’s exceptionally high claim litigation rates.

Readers will also find an update on the discussion of legal industry trends associated with increased claims litigation. The lack of transparency around TPLF arrangements and the fear of outside influence on cases are attracting the attention of legislators at the state and federal levels. The brief also describes how some law firms may use TPLF resources to encourage large windfall-seeking lawsuits instead of speedy and fair claims litigation. Research findings suggest that consumers have become aware of how ubiquitous attorney ads can influence the frequency of lawsuits, increasing claims costs.

Florida: a case study in the consequences of excessive litigation

While several states, such as California, Colorado, and Louisiana, are experiencing a drastic rise in the cost of homeowners’ insurance, this brief discusses Florida. Property insurance premiums there rank the highest in the nation. Several insurers facing insurmountable losses have stopped writing new policies or left the state in the last few years. In some areas, residents are leaving, too, because of skyrocketing premiums.

Excessive claims litigation isn’t a new issue for insurers, but it can work with other elements to shift loss ratios and disrupt forecasts, rendering cost management more challenging. In Florida, factors such as the rise in home values and frequency of extreme weather events play a significant role, along with the challenges homeowners face in the aftermath: soaring construction costs, supply chain bottlenecks, and new building codes. However, Florida also leads the nation in litigating property claims. While 15 percent of all homeowners claims in the nation originate in the state, Floridians file 71 percent of homeowners insurance lawsuits.

In Florida and elsewhere, increasing time to settle a claim puts a financial strain on insurers, which is passed on to policyholders in the form of higher premiums. Legal system abuse activities are difficult (if not impossible) to forecast and mitigate, hampering insurers’ ability to remain in the market. Therefore, legal system abuse could be one of the biggest underlying drivers of social inflation. Without preventive measures, such as policy intervention and increased policyholder awareness, coverage affordability and availability is at risk.

Triple-I remains committed to advancing the conversation and exploring actionable strategies with all stakeholders. Learn more about legal system abuse and its components, such as third-party litigation funding by following our blog and checking out our social inflation knowledge hub.