Insurance Information Institute: Sellers pay claims without disclosing liability

Investors who don’t have a stake in the lawsuit continue to seek to profit from the outcome and are contributing to the growth of insurance premiums and claims, according to a new report from the Insurance Information Institute (Triple-I).

“Third party financing (TPLF) has become a multi-billion dollar global business, turning crime into money for the good of the people,” said Sean Kevelighan, CEO, Triple-I. “It is unconscionable that plaintiffs can use the legal system to actively seek third-party contacts to pay for their crimes.”

The Triple-I report shows an analysis by Swiss Re that found that more than half of the $17 billion in TPLF funds distributed worldwide in 2020 were used by US hedge funds and family offices (financial advisory firms) with funds that brought by individuals or businesses. and many have benefited from it.

Millions of people do not know about the TPLF industry, and almost two out of five (39 percent) Americans who were asked as part of a national survey say they have never heard of the term “criminal money,” the Insurance Research Council (IRC) recently revealed. month.

“Much of the concern about third-party payments stems from the company’s lack of transparency, particularly the lack of clarity about whether foreign funds are involved in a given case,” says the Triple-I report, What Is Third-Party Payments and How It Affects Insurance Rates. and Affordability? “A few US states or territories require their lawyers or clients to disclose TPLF contracts to the opposing party.”

Lack of transparency about who pays for litigation can prolong litigation time and increase the cost of insurance in litigation and settlement, the Triple-I report says. Indeed, more than half of lawyers (55 percent) have concerns about using funders, the Triple-I report adds, citing a September 2021 Bloomberg Law survey.

“Third-party litigation funding agreements are not disclosed to the court or litigants, so transparency is essential if the court system is to be efficient and cost-effective,” Kevelighan said.

Inflation, a term used to describe the rate at which insurance premiums can rise more than economic growth, will increase auto insurance premiums alone by $20 billion between 2010 and 2019, a paper released this year by Triple-I and the Casualty Actuarial Society estimates. Expensive financial rewards and the rollback of government reform laws have contributed to this, the paper found.

“Although the effects of TPLF, like other components of inflation, remain difficult for insurance companies to calculate, understanding the risk remains important. on both sides of the case,” the newly released report of Triple-I says.


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