Georgia’s push to curb lawsuits may be well-intentioned, but there’s growing debate over whether limiting legal claims will actually reduce the skyrocketing costs of insurance premiums.
In his bid to bring down the rising cost of insurance, Governor Brian Kemp of Georgia has promised action. His pitch is clear: by restricting lawsuits, particularly in the realm of torts, the state will prevent insurers from passing on increased costs to customers. This effort is aimed at addressing the strain on businesses, property owners, and even everyday drivers who have seen premiums climb to new heights.
However, this approach may not be as straightforward as it seems. While Kemp and other Republican lawmakers argue that limiting lawsuits will lower insurance rates, experts in the field are divided on whether the changes will yield the desired outcome.
Kemp’s Plan: Curbing Legal Costs to Lower Insurance Premiums
For Governor Kemp, the issue is personal. Insurance costs have become a major burden for many Georgians, especially small business owners. Kemp’s plan centers around making it harder to file lawsuits and seeking to cap damages that juries can award in certain cases. His goal? To create a more predictable environment for insurers, which in theory, would translate into lower premiums for consumers.
But what sounds like a simple fix may not be. According to experts, the connection between tort reform and lower premiums isn’t clear-cut. While limiting lawsuits could lower liability insurance costs for businesses, particularly in industries like retail and commercial property, the impact on car insurance rates and other personal policies remains uncertain.
Indeed, some studies suggest that tort reform tends to result in bigger profits for insurance companies rather than substantial cuts to policyholder premiums. Tyler Leverty, a business professor at the University of Wisconsin-Madison, argued that the real beneficiaries of such reforms are often the insurers themselves. “The net impact is that it really improves insurer profitability,” he said, adding that there’s little evidence to suggest a direct link between curbing lawsuits and a drop in rates for consumers.
The Reality: Are Lawsuits Really Driving Insurance Costs?
For years, Georgia’s insurance rates have been climbing, and the state’s business owners have been among the hardest hit. Insurance Commissioner John King has echoed the concern, stating that the ongoing rise in lawsuits has pushed insurers to raise premiums or even limit coverage, particularly for high-risk areas like low-income housing or neighborhoods with high crime rates. Retail businesses, apartment owners, and small business owners in these sectors have faced the brunt of these rising costs, forcing some to close or reduce operations.
Yet, not everyone agrees that the lawsuit issue is as dire as it’s made out to be. In fact, some experts argue that there is little evidence to suggest that a national litigation crisis is directly causing high insurance premiums. “I went in search of the data, and I have not found it,” said Kenneth Klein, a law professor at California Western School of Law. “It’s not to say it isn’t happening. It’s to say we cannot document it.”
This suggests that the blame may not lie solely on lawsuits and legal claims. While there may be instances where litigation has pushed up costs, other factors—such as market fluctuations, company underwriting policies, and reinsurance availability—could be just as significant contributors.
Will Tort Reform Work for Consumers?
The debate continues over whether limiting lawsuits will bring real relief to consumers. On one hand, proponents of tort reform argue that businesses and commercial property owners, in particular, stand to benefit from a more predictable legal environment. This could encourage insurers to lower their rates, or at the very least, maintain more affordable premiums.
On the other hand, critics warn that the savings from lawsuit restrictions may not reach individual policyholders. Mike Iverson, a former president of the Independent Insurance Agents Association, pointed out that insurance companies like predictability—especially when it comes to setting rates. But that doesn’t necessarily mean customers will see much of that predictability in the form of lower premiums. As Iverson noted, insurers can offset losses by charging higher rates across the board.
Here’s the thing: even if limiting lawsuits lowers costs for businesses, it’s unclear if that will trickle down to everyday drivers and homeowners. This uncertainty is why many Georgia residents remain skeptical of the Governor’s plan.
- Some key takeaways:
- Tort reform could reduce liability costs for businesses, but there’s no guarantee it will lower personal insurance rates.
- Some experts argue that limiting lawsuits mainly benefits insurers, not consumers.
- Other factors, like market dynamics and underwriting policies, may play a more significant role in rising premiums than lawsuits do.
The Insurance Industry: Predictability Over Price Cuts
At the core of the debate lies the insurance industry’s need for predictability. Insurers rely heavily on risk assessments to determine rates, and the more consistent those assessments are, the better. However, if tort reform leads to greater profitability for insurers without a meaningful reduction in premiums for customers, the question remains: who truly benefits?
For many Georgia residents, the answer is unclear. While the Governor’s proposal may indeed address some business owners’ concerns, whether it will have the desired impact on consumer premiums is still uncertain.
