New Guide Explains How Legal System Abuse Raises Insurance Costs and Threatens Coverage Availability

Legal system abuse is quietly driving up insurance costs and limiting coverage availability across the United States. In response, the Insurance Information Institute (Triple-I) and Munich Re US have released A Consumer Guide: How Legal System Abuse Impacts You to explain these complex issues in accessible terms. The guide highlights how litigation trends—including third-party litigation financing, excessive attorney advertising, and outsized jury awards—are contributing to inflated costs and uncertainty in the claims process.

The guide reveals that U.S. families are paying an estimated $6,664 more each year due to these litigation-related inefficiencies, and small businesses are shouldering $160 billion annually in tort-related expenses. Additionally, legal system abuse has been tied to the loss of 4.8 million jobs nationwide. These mounting costs and inefficiencies impact insurers’ ability to forecast claims expenses and set fair premiums, especially in casualty and liability lines, where unpredictability is rising.

One major misconception is that large legal settlements primarily benefit injured parties. In reality, much of the money is absorbed by legal fees, litigation funders, and related costs. In some class actions, fewer than 10% of claimants see any payout. Meanwhile, insurance carriers face longer case durations and larger awards, which in turn affect underwriting precision and premium stability.

The report advocates for transparency and reform, including disclosure requirements for litigation financing, stricter oversight of attorney advertising, and efforts to curb medical billing abuse. These measures aim to restore balance to the legal system and preserve affordable insurance options for consumers and businesses alike.