With US auto insurance rates up 11% on average over the past year, auto premiums have been a hot topic in the industry as of late, especially in states like Florida, Louisiana and Texas, where high-risk weather events are making it more expensive for drivers to protect their vehicles.
Reflecting on the significant role of climate disasters, Michel Martinez (pictured left), area vice president, automative practice at Gallagher said, “Whether it’s flooding, hurricanes, tornadoes, or fallen trees from storms, weather is certainly a major contributing factor.”
Beyond these well-known factors, however, a lesser-discussed issue is also impacting auto insurance costs: legal system abuse.
What are ‘billboard attorneys’? How are they impacting auto insurance premiums?
Legal system abuse occurs when policyholders or plaintiff attorneys seek to escalate the costs and time required to settle insurance claims.
According to a report from the Insurance Information Institute (III), tactics include leveraging legal arrangements like Assignment of Benefits (AOB) to force undue payouts in homeowner and auto insurance markets.
Reflecting on these scam-like tactics, Breanne Armstrong (pictured right), director of insurance intelligence at J.D. Power said, “This is causing the overall costs of claims to rise, resulting in premium increases being passed on to insurance customers.”
Legal system abuse tactics are often used by predatory ‘billboard attorneys’— plaintiff lawyers who employ aggressive marketing techniques across highway billboards, TV ads, and social media, promising significant financial rewards for clients.
In states like Louisiana, which have high levels of attorney involvement in personal insurance claims, legal system abuse may cost residents over $1,100 annually, making it the least affordable US state for both auto and homeowners’ insurance.
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