RAND report finds rising insurance costs driven by increased court filings, larger jury awards

Civil Lawsuits
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RAND President and CEO Jason Matheny | Rand.org

A report from the research institution RAND, released on July 9, found that factors including larger jury awards and an increase in court filings are contributing to social inflation, meaning insurance costs are growing faster than overall economic inflation.

According to RAND’s study, inflation-adjusted trial awards between 2010 and 2019 experienced a compound annual growth rate of 7.6%. Additionally, the study found that court filings in state courts increased by approximately 10% during that time frame. RAND said experts and other stakeholders have asserted that social inflation has "disruptive effects," including plaintiff’s attorneys requesting larger amounts of compensation for their clients and becoming "less likely to accept reasonable offers from insurers to settle claims." Plaintiff’s attorneys have also become more likely to accept litigation funding from third parties such as hedge funds and have grown "increasingly aggressive in advertising" to solicit more clients. Juries have become "more likely than ever before to award plaintiffs sums of money that are wildly disproportional to the facts of the case," according to the study.

A report from the U.S. Chamber of Commerce Institute for Legal Reform (ILR) found that Georgia’s rising number of nuclear verdicts, or verdicts larger than $10 million, is contributing to the state’s increasing insurance costs. Between 2013 and 2022, Georgia had the fourth most nuclear verdicts per capita out of any state in the country, according to the report. The state saw 64 nuclear verdicts during that time period. "It’s time to address this problem before it gets worse," said Oriana Senatore, ILR Senior Vice President of Research and Strategic Development. Senatore added, "Most people may not realize that nuclear verdicts affect almost everything, from the prices of common household products to availability and affordability of insurance."

Inflation in the car insurance index increased 0.9% in June and 19.5% during the year ending in June, according to the most recent Consumer Price Index summary. Comparatively, overall inflation decreased 0.1% in June and stood at +3% for the last year.

Georgia drivers are paying an average of $2,562 each year for full coverage car insurance compared to the national average of $2,329, according to Bankrate.

RAND experts conduct research and develop public policy solutions pertaining to safety, security, health, and prosperity, according to its website. The organization is nonprofit and nonpartisan.