Why Your Premiums Keep Climbing & Why Half the Country’s Ignoring It

Welcome to another week of “Insurance is Simple, Not Easy.” In my continued effort to ensure that my content resonates with people - and that I’m focused on the right areas of interest - I did a quick Google and ChatGPT scan of the most researched topics within the commercial insurance sector. The results, I’m happy to report, supported my thesis: rates (and social inflation) take the number one and number two spots in terms of search volume. Here’s the full list.

The most telling part of the chart (above) is that number 1 (pricing and trends) and number 2 (liability and social inflation) are essentially part of the same problem. What’s that problem? You won’t be surprised to hear that, in my view, it’s largely driven by Third Party Litigation Financing (TPLF).

So, given how high this topic ranks among insurance consumers, customers, and industry stakeholders, you might ask: how many states are actually doing something about it? There are two primary categories - states that have passed bills and states that are actively discussing legislation. Then, of course, there are the many states where nothing is happening at all. Here are a couple of graphics that may help illustrate:

As you can see, some states are actively evaluating TPLF. The states that have already passed TPLF legislation include: Wisconsin, Indiana, Montana, West Virginia, Louisiana, and Kansas. A number of other states have tried and failed, but still - roughly 20 states haven’t tried at all.

This tells me there’s still a significant disconnect among state leaders. Insurance is a constant—and critical - piece of the broader affordability conversation in the United States right now. I hear it discussed daily on CNBC and various podcasts. Yet it’s often framed as an industry problem. Don’t get me wrong - there are certainly culpable parties within the insurance industry. But for the most part, rates have been accelerating for real reasons. The property side is well-understood. What’s not as obvious to homeowners (or legislators and media outlets) is that rising casualty insurance costs - think auto, umbrella, and liability - are heavily influenced by this relatively new investment class: Third Party Litigation Financing.

If you’ve heard me talk about TPLF before, expect to hear even more. In fact, the new season of my podcast, RiskCellar, which I co-host with Nick Hartmann, will be focusing primarily on TPLF. It’s a massive issue that cannot be understated. And until media and government start giving it the right kind of attention, it will continue to wreak havoc on insurance pricing.

A great example of “the right kind of attention” can be found in my upcoming interview with Judy Seeberger, which will be released next week. Judy is a Minnesota State Senator representing District 41 and the author of Minnesota’s own TPLF bill, SF2929. The bill, unfortunately, has not yet secured enough votes to pass in the Senate. As you examine this bill and others like it, you’ll find a common theme: transparency. In other words, protecting plaintiffs from the predatory practices of some TPLF firms. That’s a fine objective - but it’s only half the issue.

There are indeed transparency concerns. But in my view, the bigger issue is the systemic impact of TPLF on the cost of insurance - a topic that’s front and center on nearly every news outlet. I asked Judy whether these bills might have a better shot if they were framed through that lens. She acknowledged the merit of that approach and agreed it could help improve the bill’s acceptance -but it didn’t seem to have been on the radar prior to our conversation.

Once again, we see this strange disconnection between public headlines and underlying realities. While these legislative efforts are a good start, I would encourage policymakers to link TPLF directly to insurance premium escalation. If the goal is genuine reform and increased transparency, lawmakers need a more robust rationale for change. And making the rising cost of insurance part of that rationale should be at the top of the list.

If you need further evidence of how serious this issue has become, look no further than the July 7th op-ed co-authored by Evan Greenberg (CEO of Chubb) and John Doyle (CEO of Marsh) titled “End the Tax Break for Litigation Funders.” In it, they call for tax reforms targeting TPLF, including reinstating a Trump-era proposal to tax litigation funders at 40%. They also push for greater transparency, mandatory disclosure, and limits on funder influence over litigation strategy.

One of the things I asked Senator Seeberger was whether jurors are made aware that a TPLF firm is funding the plaintiff. She said no - this isn’t part of the required disclosure. To me, that represents a fundamental fail and an unfair disadvantage to the defense. Every juror knows (implicitly or explicitly) that insurance is involved. But they have no idea what TPLF is or whether it’s playing a role in the case.

In 2024 alone, there were 135 verdicts in the U.S. exceeding $10 million, with a median award of $51 million, up dramatically from $21 million a decade ago. The estimated economic drag from TPLF on the U.S. economy is $529 billion, or about $4,200 per household. So yes, the problem is bigger than predatory lending or unfair plaintiff contracts. It’s systemic, and it’s slowly bleeding the insurance industry dry.

These problems aren’t going away. In fact, they’re getting worse. More states need to step in, and they need to focus not just on consumer transparency but on protecting the overall health of the insurance marketplace. That’s not to say insurers aren’t making money, because they are, but if deductibles and self-insured retention levels get so high that insurance no longer transfers meaningful risk… then what’s the point?

This is a very delicate balance. And right now, we’re teetering on the edge.