Rising lawsuits and large jury verdicts are driving up liability insurance costs across Alabama, according to a new Alabama Department of Insurance report that found claim severity has surged far faster than inflation over the past four years.

The findings come as business groups and legal advocates continue to debate whether Alabama should pursue tort reform measures similar to those enacted in other states.

The Alabama Liability Insurance Coverage Data Call analyzed multiple insurance lines — including private and commercial auto, general liability, professional liability and umbrella coverage — to better understand what is driving rising insurance costs in the state.

From 2020 to 2024, the average cost of a liability claim increased 59%, far outpacing general inflation, which rose 23% during the same period. While the number of claims remained relatively stable, insurers paid significantly more per claim, with the average paid per claim increasing 45.7% and the total amount paid on claims rising 37.6%.

Lars Powell, executive director of The University of Alabama’s Center for Risk and Insurance Research said, “The Alabama Liability Insurance Data Call report demonstrates that liability costs in Alabama are substantial (about $880 per household in 2024) and increasing faster than inflation. The patterns observed in the data are consistent with an association between higher levels of litigation and increased claim severity across multiple lines of insurance. It is important for Alabama policymakers to have this information as they consider potential approaches to address rising insurance costs.”

Personal auto insurance premiums tracked inflation until 2022 before diverging sharply upward as losses increased. Commercial auto liability premiums and loss costs also exceeded inflation levels by 2024, according to the analysis.

The report found lawsuits play a major role in driving higher insurance costs, even though they represent a small share of total claims.

Less than 10% of Alabama liability claims involve legal action, but those cases account for more than one-third of all dollars paid. Legal claims also take longer and cost more to resolve. About 26% of legal claims remain open for more than two years, compared to 8% of non-legal claims, and defense costs for legal claims increased 32%, compared to 16% for non-legal claims.

Harrison Proctor, executive director of Alabamians for Legal Reform said, “Affordability remains a major concern for Alabama families, and the data in this report shows that liability costs are a key driver of rising expenses. Recent progress in Florida, Georgia, and Louisiana demonstrates that targeted reforms work. These states are already seeing lower premiums, increased competition, and more stable costs, creating a more affordable and predictable market for everyone.”

The number of claims exceeding $1 million doubled from 51 in 2020 to 102 in 2024. Legal claims that hit full policy limits also increased, rising from 22% in 2020 to 28% in 2024, while non-legal claims remained relatively stable.

Insurance companies responding to the data call cited aggressive litigation tactics, escalating jury verdicts, medical overbilling, litigation financing, and increased attorney advertising as major drivers of rising claim severity and insurance costs.

The report summary points to reforms in Florida, Georgia, and Louisiana aimed at curbing litigation costs. Those states have reported premium reductions and more insurers entering their markets following legal reforms.

Sherri Blevins is a staff writer for Yellowhammer News. You may contact her at [email protected].