Greed
A very intelligent client recently shared his frustration with insurance companies’ lack of help with tort reform. The need for tort reform is significant. Businesses are being squeezed by high liability premiums and, often more importantly, many are sick and tired of a legal environment that leaves them vulnerable to ridiculous liability suits.
In this client’s situation, various business groups were working constructively to make the case for tort reform. The data definitely supports the need for tort reform. However, the carriers refused to provide data or lobbying support. If you are an agent, or even a carrier employee, how often have you heard carriers say:
Nuclear verdicts are a huge threat! The industry will fail if these are not controlled. Ask Google for a list of how many press releases exist on this subject authored or contributed to by insurance companies. (And by the way, nuclear verdicts are not a factor. Mathematically, they do not move the needle on overall surplus. Individual carriers lacking adequate surplus are at risk, but that’s an individual carrier problem, not an industry problem.)
We have to raise rates because we’re losing money due to all the liability claims.
The plaintiffs’ bar is just too strong. Until something is done, rates are going to keep increasing.
And whatever else.
Yet they will not support agents and other business groups in tort reform. I am talking real world, not ivory tower and press release world. Most will not support their agents or insureds.
Why is this? Because most carriers don’t really care unless the liability claims truly threaten their livelihood, which, barring claims like asbestos years ago, never happens. Insurance is a cost-plus industry. A cost-plus industry is one where they tell the customer the price is their cost plus X% profit. If claims increase, carriers raise their rates.
As litigation continues to rise, insurance companies show growth and higher profits regardless of their ability or true success. They simply ride the wave of rate increases and take credit for it when they haven’t done a thing. If they want to prove otherwise, they should produce the equivalent of a same-store sales report. In other words, divide their growth between net new customers’ premiums and overall premium growth. That’s simple to do, and some carriers already do it. I have noticed the carriers capturing the most market share are the ones most likely to provide this data because they are not just riding the wave.
Carriers have made record, unbelievably huge profits each of the last three years. They are averaging almost double their historic profits. A Wall Street Journal article on August 9, 2026, reported that almost 50% of all personal auto liability claims were closed no pay last year. And carriers want to ride the wave of more rate without doing anything to fix the underlying problem. As the saying goes, it is okay to be a pig, but not a hog. When almost 50% of claims are not paid, even if it is a legitimate no-pay because of fine print in the policy, when making record profits, the industry is not improving its image. It is no wonder politicians listen more closely to the plaintiffs’ bar.
Historically, agents have gone a long way towards protecting insureds from carriers’ poor behavior. This is one reason carrier retention rates have always been materially worse than agents’ retention rates. If the carrier misbehaved, the agent moved the client to another market. I am not sure the entities buying agencies will all be of the same persuasion because it is cheaper not to remarket accounts, suffer some retention loss, and join the surfboard riding the wave of rate increases. I hope I’m wrong on this point.
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None of the materials in this article should be construed as offering legal advice, and the specific advice of legal counsel is recommended before acting on any matter discussed in this article. Regulated individuals/entities should also ensure that they comply with all applicable laws, rules, and regulations.