In the heart of Atlanta, a proposal is sparking robust debate: Georgia Governor Brian Kemp suggests that limiting lawsuits will deter rising insurance costs. At first glance, this claim seems straightforward, but in truth, the relationship between tort reform and insurance premiums isn't that transparent.
Governor Kemp is set to unveil his new legislative proposals, casting an emphasis on what he portrays as inflated lawsuits and excessive jury awards driving up insurance rates. This initiative follows his commitment to the Georgia Chamber of Commerce to address these critical issues head-on.
Delving deeper, it's clear the situation is multifaceted. Proponents of the reform argue it could alleviate liability insurance costs for businesses and commercial property owners. However, the effects on personal insurance, such as auto policies, remain ambiguous. Research often suggests that these reforms may bolster insurer profitability rather than generate significant savings for policyholders. Tyler Leverty, an esteemed business professor at the University of Wisconsin-Madison, notes, The net impact is that it really improves insurer profitability.
Insurance Commissioner John King supports the Governor’s stance, attributing rising insurance rates in part to a surge in lawsuits. He explains how insurers are reducing coverage for various sectors, significantly impacting small business owners, particularly in high-crime zones and low-income housing providers. In southeast Atlanta, small convenience store owners are forced to close their doors, unable to secure insurance, King lamented.
Critics, however, challenge the claim that a litigation epidemic is inflating insurance costs. Kenneth Klein, a law professor, has not seen clear-cut data to back this up. It’s not to say it isn’t happening. It’s to say we cannot document it, says Klein. Further voices in the industry, such as Mike Iverson of Oakbridge Insurance, argue that what insurers value most is predictability in rate setting and loss distribution.
High-profile jury awards in Georgia – for instance, a $43 million verdict against CVS following a shooting in its parking lot, and a $31 million verdict against a mobile home park – illustrate the significant influence single cases can have. Yet, detractors point out that such cases are outliers, and insurance companies remain profitable overall. Joanne Doroshow, from the Center for Justice & Democracy, states, Whenever they want an excuse to raise rates or limit coverage, they will use a few verdicts and claim they affect their bottom line.
Studying tort reform’s effect in other states illustrates the difficulty in measuring its impacts due to varied legislative environments and economic factors. While some research indicates potential benefits, findings are far from definitive.
Several additional factors continually pressure insurance rates – inflation, extreme weather events, and rising costs of materials and labor are also central contributors. It's common for the insurance market to undergo tough cycles, with rising rates and lesser coverage availability in challenging years.
Although Georgia’s insurance market has seen decreased profits relative to other states in recent times, longstanding data from the National Association of Insurance Commissioners shows standard fluctuations. Incomplete data leads to some uncertainties; for instance, an uptick in lawsuits leading to maxed-out insurance payouts noted in King’s auto insurance report.
Opponents of these reforms, such as the Georgia Trial Lawyers Association and experts like David Stegall, argue the state’s high accident rates justify the frequency and magnitude of claims, even as adjusted data suggests stability in claim numbers and payouts.
Despite these assurances, Georgia residents still face higher car insurance premiums – 11% to 68% more than counterparts elsewhere, coupled with a 200% increased likelihood of road mishaps.
Business owners like Adam Willis, president of F&W Transportation, report surging premiums over the past decade alongside dwindling coverage options. He notes a rise in lawsuits against his company seems inevitable.
Those defending the existing legal system warn that capping lawsuit rights may undermine consumer protections without fulfilling the promise of reducing insurance costs. The governor insists that limiting your rights will drive lower insurance rates, but this is not just improbable – it's not in the best interest of Georgians, critiques state Representative Tanya Miller.
