The Consumer Choice Center has published a new policy primer, Fixing What’s Broken: Practical Consumer-Friendly Insurance Reforms to Save Money, advocating for reforms aimed at reducing costs and increasing options in auto insurance for American drivers. The proposed “auto choice” system would allow consumers to choose between tort and no-fault insurance models, aiming to reduce litigation expenses, foster competition, and lower premiums.
“The legal nightmare that comes with every fender bender or more serious auto injury is known to every American, as they’re reminded by the slew of injury lawyer billboards on the interstate.” said Yaël Ossowski, Deputy Director at the Consumer Choice Center.
Previous efforts to pass “auto choice” legislation have often stalled due to opposition from third-party litigation funders and law firms benefiting from high litigation costs. The primer argues that excessive litigation and the influence of third-party litigation funding (TPLF) contribute to high insurance costs. Reforming these practices, along with implementing tort reform, is presented as a solution to make insurance more affordable.
“For too long, we’ve allowed car insurance costs to balloon because of the adversarial nature of our highly litigious justice system, rather than understanding that most other countries do not force drivers into court after each accident,” Ossowski said. “Giving auto insurance consumers the ability to choose between a no-fault and a tort system would allow flexibility, remove the adversarial declaration of liability that inflates lawsuits… Best of all, good drivers with clean records would benefit from substantially lower premiums and simple plans.”
Bankrate describes TPLF as a billion-dollar industry where investors, such as hedge funds, finance lawsuits in exchange for a portion of settlements or awards. This practice can lead to high-cost litigation and extended settlement processes.
According to the Insurance Information Institute (Triple-I), excessive litigation has led to insurers paying out over $1.10 for every $1 in premiums, contributing to rising auto insurance costs.
Experts warn that, without reforms addressing TPLF and aggressive legal advertising practices, consumers may continue to face escalating premiums.