What Is Driving All These Issues? How Is The Insurance Market Responding?
Inflation is certainly playing a part across the nation. Repair times for all types of losses have increased dramatically and the shortage of parts and materials is taking its toll. Georgia has not been immune from this, but this does not account for Georgia being worse than the national average.
Georgia has witnessed multiple billion-dollar claim settlements built on strategies from court rulings such as public liability, Holt demands, and trucking direct action (naming the insurance company as a defendant). Undisclosed litigation funding and a host of other strategies are becoming much more common as trial attorneys seek to maximize a claim.
As a direct result of decreased profitability and claims volatility, the surplus lines markets have continued to grow at an accelerated rate. For the first time in 2022, we saw surplus lines premiums exceed $2 billion in Georgia, an increase of over $265 million from 2021, and all indications are that 2023 will show continued growth.
What Does This Really Mean Looking Forward for our Clients and our Economy?
Insurance coverage rates will continue to increase and the terms on the coverage offered will continue to deteriorate. It is common to see assault and battery exclusions on certain business sectors that simply were not there in the past. Nuclear verdicts come with a cost to all Georgians and that cost is rate increases for Georgia consumers. Although independent agents will most likely gain from this marketplace, it comes at a cost to our clients, and our communities.
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The June 30 Georgia Supreme Court ruling has increased the liability for property owners with regards to any crimes that may be committed on their property without any guidelines for these property owners that may offer some protections. All signs from this ruling are that coverage will continue to deteriorate with additional exclusions and sub-limits on certain coverage that was formerly provided at full policy limits. We as agents must have discussions with our clients early and share the contributing factors to this difficult market where rates are climbing sharply.
Will Tort Reform Legislation Create Change and How Long Will it Take to See the Effect?
We may look to our neighbors to the south for this answer. Florida has been one of the most litigious states in the nation leading to a moment of change. Elected officials chose to take on tort and many wondered if it would bring about immediate savings regarding insurance premiums. Upon passing Florida House Bill 837, law firms in Florida filed nearly 3.6 million cases, in just one month, ahead of the law taking effect, all were seeking to have their case tried under the old statute. Some Florida attorneys declared the new law was an attack on their livelihood.
It is evident that it will take time for these lawsuits to work their way through the system in Florida and as these cases lift, meaningful reforms will begin to ease the claims trend lines.
To be abundantly clear, the insurance marketplace’s rate and coverage crisis will not disappear in the flip of a switch via favorable legislation. In our tort system, various statutes of limitation are applicable to certain torts. There will be a run-out period we will have to endure post potential improved legislation passing. Once this period has expired and the legislation has had time to season, barring any unforeseen factors, the marketplace should show signs of improvement.
The data in the IIAG Georgia P&C Marketplace Report illustrates the difficulty across a host of lines of coverage and a claims trend line that is extremely difficult to match with premium increases. It is easy to demonize insurance companies and think that there is no impact to society from these verdicts. However, the artificially inflated additional losses that are ubiquitous in our tort system will continue to add to consumer costs, decrease availability of coverage, and will have a negative impact on insurance carrier’s appetite to write insurance coverage in Georgia.
Without change, we can expect insurance companies to make difficult business decisions just as CVS and a variety of retailers have had to do in other venues. IIAG stands behind Governor Brian Kemp in his efforts to enact meaningful lawsuit reform in the 2024 legislative session. Our association’s primary mission is to protect the Georgia insurance marketplace, and we will need the engagement of all members to help educate our policymakers on the state of the Georgia marketplace and the consequences of inaction. 
This article was originally posted in IIAG's Magazine, The Dec Page Quarterly (Winter 2023). You can view the original article here.
