Bonnie Guth, head of Government Affairs at Munich Re US, has raised concerns about the impact of third-party litigation funding and jury anchoring on insurance costs. According to a press release issued on February 4, Guth said that the American Property Casualty Insurance Association (APCIA) and Munich Re US are calling for legal reforms to address these issues.
"It is important to raise awareness and provide education," said Guth. "Improper signals to jurors, judges, and defendants about the value of damages. This can lead to higher insurance costs."
According to the press release, a survey conducted in 2024 by APCIA and Munich Re US revealed that 69% of Americans believe third-party litigation funding (TPLF) and jury anchoring contribute to increased insurance costs. Furthermore, 77% of respondents view foreign investment in U.S. lawsuits as a potential national security threat, with 78% supporting its prohibition. The findings underscore growing concerns over potential abuses within the legal system, with most respondents favoring policy reforms aimed at increasing transparency and reducing financial impacts on consumers.
Gallagher Bassett reports that jury anchoring is a strategy where attorneys introduce a high reference number to influence jurors' perception of damages. Even if jurors consider the amount excessive, they often use it as a baseline for their award due to their lack of experience in valuing pain, suffering, or disfigurement. While both plaintiffs and defendants can employ this tactic, it is primarily used by plaintiffs, leading to inflated awards that affect insurance costs and legal fairness.
Third-party litigation funding allows external and foreign investors to finance lawsuits in exchange for a share of the winnings. This practice drives up litigation costs and insurance premiums. Between 2018 and 2023, litigation management costs in the property and casualty insurance industry rose by 19%, adding $4-5 billion in expenses and bringing total litigation costs to $24 billion. As TPLF investments in U.S. litigation are projected to grow from $8 billion in 2020 to $30 billion by 2028, insurers are withdrawing from certain markets, reducing coverage options for policyholders, according to Leaders Edge.
PropertyCasualty360 reports that TPLF has significantly impacted auto insurance costs by enabling more lawsuits and contributing to larger settlements. This has increased claims expenses for insurers, leading to higher premiums for policyholders. Between 2019 and 2022, personal auto insurance rates surged by 46%, attributed largely to the influence of TPLF.
According to her LinkedIn profile, Guth is a legal expert with over two decades of experience in insurance law and policy. She holds a J.D. from Northwestern University and a B.A. in Economics from Brandeis University.
