IRC Study: Public Perceives Impact of Litigationon Auto Insurance Claims

Most Americans believe attorney advertising increases the number of liability insurance claims and lawsuits, according to recent research from the Insurance Research Council (IRC). The survey also indicated that consumers see a connection between attorney advertising and insurance costs.

The IRC – like Triple-I, an affiliate of The Institutes – also found that consumer awareness of third-party litigation funding has increased, though many Americans remain uncertain what to think of the practice. Litigation funding – in which third-party investors assume all or part of the cost of a lawsuit in exchange for a percentage of the settlement – is often cited as contributing to “social inflation.” Social inflation refers to the impact of rising litigation costs on insurers’ claim payouts, loss ratios, and, ultimately, how much policyholders pay for coverage.

“The public sees a connection between attorney ads and the cost of insurance,” said IRC President and Triple-I CEO Dale Porfilio, FCAS, MAAA. “Two-thirds of respondents who had an opinion said advertising by attorneys increases the number of liability claims and lawsuits. Fifty-nine percent said such advertising increases the cost of insurance.”

The survey also found 81 percent of Americans had seen an attorney advertisement within the past year. Thirty-nine percent had never heard of the term “litigation funding.”

The IRC study, Public Attitudes on Litigation Trends and the Role of Attorneys in Auto Insurance Claims, consisted of an online survey with over 1,500 respondents. It also uncovered that:

Consumers generally expect insurers to settle auto insurance claims fairly and quickly, but one in four say they would hire an attorney before even contacting an insurer;The views of many consumers about the benefits of hiring attorneys to help with insurance claims conflict with evidence from claims-based research;Most Americans believe there are too many personal injury lawsuits today;Significant generational differences exist on these topics, with younger respondents being far more likely than older respondents to favorably view attorney involvement and litigation; andThe public’s level of understanding suggests some educational opportunities for those seeking to address costs in the insurance system.

“This survey builds on many years of IRC work examining the role of attorneys in insurance claims and the resulting consequences,” Porfilio said. “Our longstanding series of closed auto injury claim studies has shown an ever-increasing rate of attorney involvement, even among no-fault claims.”

Porfilio noted that these studies consistently show that claimants who hired attorneys waited significantly longer to receive their settlements and – after medical expenses and legal fees – those settlements were smaller than for claimants who did not.

“Given the costs added to the system and the lack of evidence of clear benefit for the claimant, it is important to understand public attitudes about attorney involvement,” Porfilio said.