We write today on behalf of the Alabama Association for Justice in response to the recent reporting on the Alabama Department of Insurance’s liability insurance claims cost report, which claims rising liability claim severity and large verdicts as factors in higher insurance costs across the state.
We agree that the cost of liability insurance is an important concern for Alabama families and businesses. It’s understandable that rising insurance premiums attract attention from policymakers, insurers and the media.
But it is equally important for the public to understand why these costs are rising — and who bears the burden of those increases.
Insurance costs
Insurance premiums reflect the cost of losses insurers pay — both for property damage and for real human injuries. The recent report asserts that lawsuits are the primary reason for these increases, despite rampant inflation in many component areas.
Obviously, these numbers reflect:
- substantial rises in the cost of medical care
- increased wages (and compensation for their loss)
- growth in long-term disability needs
- rising costs and damages suffered by individuals injured in car wrecks, workplace accidents, negligence cases, and other serious life-changing events
Lawsuits do not cause injuries, they are a pathway for injured Alabamians (individuals and businesses alike) to seek fair compensation when they have been damaged. Lawsuits are a last resort after suffering serious losses and being unable to settle fairly with insurers. But thank goodness we have that right.
What the report does not capture
The Department of Insurance’s data call and summary analysis provide interesting information, but there are limitations worth mentioning:
- The report is based on self-reported insurer data that was not audited or independently verified
- Rising costs in liability lines reflect nationwide trends in rising healthcare costs, wage replacement needs, and the expense of defending complex cases
- Insurance company decisions about reserve levels, underwriting practices, rate filings, and defense strategies also influence the cost of premiums — and those decisions are not always transparent to policyholders
It is also important to look beyond claims costs and consider how insurance companies themselves have performed financially during the same period.
Insurance companies are aggressively seeking increased profits
According to industry financial data, U.S. property and casualty insurers — the companies that write most liability insurance policies — posted record profits in 2024, even as they raised premiums. Industry-wide net income after taxes climbed to roughly $170 billion in 2024, up sharply from the prior year, driven in part by higher premiums and strong investment income.
For example, the aggregate net income for the U.S. property and casualty insurance industry more than doubled from about $87 billion in 2023 to nearly $170 billion in 2024 — a level not seen in recent history. That increase came at the same time that most policyholders saw significant rate increases on auto, liability, and homeowners coverage.
Even some individual insurers reported strong earnings. For instance, USAA — one of the largest property and casualty insurers nationally — reported nearly $4 billion in profit in 2024 and record revenue, as insurance premiums collected grew significantly.
This data shows that many insurers remain financially strong and able to generate large profits, even while they have asked policyholders for substantial rate increases. That disparity between rising premiums and rising profits matters when the industry wants to divert our attention to their increasing costs.
Claims handling and litigation strategy
Insurance companies play an active role in how claims develop and how costly they become.
Over the last several years, many insurers have adopted a strategy of delaying, denying, or aggressively litigating claims rather than resolving them early. This approach is often driven by internal cost-containment policies and national claims-handling models, not by the individual facts of a particular case.
They mistakenly believed that this would save them money. But this strategy drove up overall costs for insurers rather than reduce them.
The Department of Insurance report itself shows that litigated claims take significantly longer to resolve, incur far higher defense costs, and are much more likely to reach or exceed policy limits. Legal claims are also far more likely to involve prolonged settlement delays — with a much higher percentage remaining unresolved for two years or more compared to non-litigated claims. This is a delay in justice for those injured or damaged, which costs them as well.
When insurers refuse to fairly evaluate and pay claims early, injured people and insureds are often left with no choice but to file suit to protect their rights. Once litigation begins, costs rise quickly — not only because of attorney involvement, but because insurers incur higher defense expenses, expert fees, and extended case management costs.
In other words, litigation is often the result of claims-handling business decisions, not their cause. Early, fair resolution benefits everyone — injured individuals receive timely compensation, insurers reduce legal expenses, and overall system costs decline.
Alabama Association for Justice stands ready to engage in constructive dialogue about solutions that:
- Help keep liability insurance affordable for families and employers
- Ensure injured people and damaged businesses can obtain fair compensation
- Promote a balanced claims system where both insurers and their insureds are treated equitably
We encourage reporters and policymakers to look beyond simple narratives and consider all dimensions of this issue as discussions continue.
Clint Mountain is the president of Alabama Association for Justice and the managing partner at Mountain & Mountain in Tuscaloosa. Raised in Montgomery, Alabama, he obtained his undergraduate degree in business management from The University of Alabama in 2000 and his J.D. from The University of Alabama School of Law in 2003.
