The numbers on your latest insurance renewal could tell a frustrating story, especially if you are looking at auto or umbrella/excess coverage. While many attribute rising premiums to simple inflation or “supply chain issues,” a more complex and aggressive force is at play: legal abuse.
While it’s true that much of the rise in insurance premiums has to do with the increase in litigation and large settlements driven by social inflation, there’s a “dirty little secret” driving some of these large verdicts that many aren’t aware of.
The Rise of Litigation as an Asset Class
In the world of Mergers and Acquisitions (M&A), high valuations have led “creative” investors to hunt for new yield. They found it in the courtroom. Litigation is no longer just a quest for justice; it is one of the fastest-growing investment opportunities in the U.S.
Enter Third-Party Litigation Funding
Third-Party Litigation Funding (TPLF) occurs when an outside agent, with no connection to the case, pays a plaintiff’s legal fees in exchange for a cut of the settlement.
- An estimated $15.2 billion was allocated to U.S. commercial litigation in 2023.
- That number is expected to hit $31 billion by 2028.
- Lawsuits that once cost $10 million to resolve are now skyrocketing to $50 million or more, as funders push for “nuclear verdicts” to maximize their ROI.
This trend has increased the amounts defendants are settling for, thereby increasing premiums paid, while lowering the compensation received by plaintiffs. While most brokers are simply passing along the bad news, Marsh is taking a stand by exposing the underbelly of this trend and how it’s hurting the insurance industry and our economy.
The Impact on Your Wallet: Auto and General Liability
For everyday consumers and business owners, this isn’t just a legal theory; it’s a direct tax. When litigation becomes a profit-driven industry, the cost of products, services, and insurance must rise to keep pace.
According to a report by the Partnership for New York City, excessive litigation results in premiums that are significantly higher than the national average:
- General Premiums: 15% higher.
- Health Insurance: 12% higher.
- Auto Coverage: A staggering 52% higher.
Where Does the Money Actually Go?
Perhaps the most troubling aspect of the current environment is that the “victims” aren’t seeing the majority of the money. In Florida, a 10-year study found that of the $51 billion paid out by insurers, a massive 71% went to attorneys’ fees and public adjusters, leaving actual policyholders with less than a third of the settlement.
The Fight for Reform: Federal and State Action
Fortunately, the tide is beginning to turn as legislators recognize the predatory nature of unregulated TPLF, a position that Marsh and our CEO, John Doyle, have championed.
Federal Efforts
| Act | Primary Goal |
| TPLF Act | Closes tax loopholes by taxing funders, especially foreign entities, so that returns are treated as ordinary income rather than capital gains. |
| Litigation Transparency Act | Requires the disclosure of TPLF agreements and payments in civil lawsuits so the court knows who is actually pulling the strings. |
| Protecting Our Courts Act | Increases transparency and prohibits foreign states and sovereign wealth funds from funding U.S. lawsuits. |
State Progress on Tort Reform
States like Georgia (2025), Louisiana (2024), and Florida (2023) have made progress in a key area needed to curb the cost of these out-of-control lawsuits: tort reform. Florida, which once accounted for 79% of all homeowner lawsuits nationwide despite having only 9% of claims, has taken aggressive action. They cracked down on bad-faith litigation by eliminating the “one-way” attorneys’ fees provision in favor of policyholders, permitting insurers to include mandatory binding arbitration in a policy. They also prohibited the Assignment of Benefits under any residential or commercial insurance policy.
While tort reform efforts have made progress, there is still a lot to be done. One of the key areas that remains largely untouched in personal injury cases is the “zero risk, all reward” strategy. Anyone can hire a personal injury attorney who works on contingency (generally not getting paid unless a settlement or award has been achieved) – zero risk, while the defense mounts up legal fees. Other countries have a “loser pays” principle (often called the English Rule or “costs follow the event”). Adopting a principle such as this could prevent some of the frivolous lawsuits that are getting into the system.
The Marsh Advantage
While the insurance industry is struggling to adapt, Marsh is leading the conversation on risk finance. By analyzing these macro trends – from the aggressive plaintiff’s bar to the influx of foreign capital – Marsh is helping clients navigate a market where “legal abuse” has become a standard line item.
Modernizing liability laws doesn’t mean reducing accountability; it means ensuring that insurance remains affordable, and that settlements reach the people who need them, rather than the investors who funded them.
In an era of high-valuation M&A and predatory litigation, having a broker that understands the “why” behind the rate hike and then is trying to do something about it is the first step in fighting back.
Tony Hopkins
Tony Hopkins is a Senior Vice President of Horton’s Risk Advisory division, where he leads the M&A and Welding and Gas practice groups. He provides clients with comprehensive, cost-effective and innovative solutions to meet their most complex, risk-related challenges.
Material posted on this website is for informational purposes only and does not constitute a legal opinion or medical advice. Contact your legal representative or medical professional for information specific to your legal or medical needs.
