In the news release, Demotech, Inc. Unveils Critical Findings on
Impact of Tech-Enabled Insurance Claim Instigation on the
Transportation and Logistics Sector, issued 01-Aug-2024 by Demotech, Inc. over PR Newswire,
multimedia has been added to accompany the press release text and
changes have been made to the release body as incorrectly
transmitted by PR Newswire. The complete, corrected release
follows:
Demotech, Inc. Unveils Critical Findings on Impact of Tech-Enabled
Insurance Claim Instigation on the Transportation and Logistics
Sector
COLUMBUS, Ohio, Aug. 1, 2024
/PRNewswire/ -- Incorporated in 1985, Demotech, Inc. (Demotech) is
a leading financial analysis firm serving the Property and
Casualty, Life and Health, and Title insurance sectors. In
July 2022, Demotech became the tenth
firm to be registered with the U.S. Securities and Exchange
Commission as a nationally recognized statistical rating
organization (NRSRO) in the class of insurance companies, joining
AM Best, Fitch, Moody's, and Standard & Poor's.
While proud of this significant milestone,
Demotech's 2022 discovery of a covert practice by unscrupulous
lawyers targeting insurers marks a defining moment. Demotech
research conducted with Todd
Kozikowski exposed troubling trends that we are
comprehensively detailing today.
We observed a sharp rise in claims litigation
against certain insurers that had ceased writing new business, shed
policies, or reduced underwriting. The growth exceeded what was
expected due to rampant lawyer advertising, prompting us to engage
Mr. Kozikowski, an expert in data analytics and artificial
intelligence, to explore the potential role of technology in this
phenomenon.
Our research revealed the "tech-enabled claim
instigation" business model: a combination of search engine
optimization (SEO), litigation marketing, litigation analysis
platforms, and litigation financing aimed at originating contested
claims. The model heavily targets the transportation and logistics
sector and commercial automobile liability insurance providers.
The Impact of Tech-Enabled Claim Instigation
on Supply Chains and Transportation
Commercial auto liability insurers identify
"nuclear verdicts" and "social inflation" as major contributors to
deteriorating operating results. Demotech believes the targeting of
insurers and trucking companies is a major cause. A review of
countrywide commercial automobile liability claim counts from 2014
to 2023 revealed significant trends, as shown in Chart 1.
- Declining Percentage of Claims Closed with Payment (blue
line): The quicker a claim is closed, the less it costs. A
declining trend in quick settlements means rising claim costs in
commercial automobile liability.
- Rising Percentage of Claims Closed Without Payment (gray
line): While appearing to be favorable at first glance, this trend
indicates increased defense costs for insurers, likely due to the
scaling and economies of using litigation platforms to crate and
file contested claims.
- Increasing Percentage of Claims Outstanding (orange
line): More human and financial resources are required to settle
these claims – even those that don't result in indemnity – further
straining insurers and self-insured entities.
Saturation by an increasing number of litigated
claims can overwhelm limited resources of state judicial systems,
benefiting opportunists, as prolonged settlements result in higher
costs.
Further evidence of the impact of tech-enabled
claim instigation on the transportation and logistics industry is
seen in the online targeting of specific companies by multiple
entities seeking to instigate contested claims, as in Chart 2..
The size of each bubble in the chart indicates
the scope of a specific opportunist's online presence relative to
the other opportunists reviewed. The size of a targeted entity
within a bubble represents the entity's degree of targeting by the
opportunist.
The diagram in Chart 3 highlights key
discoveries of Demotech research relative to an individual supply
chain logistics company.
Conclusion
Demotech and Todd
Kozikowski uncovered the existence of a scandalous
nationwide business model that leverages search engine
optimization, litigation financing, and marketing to use AI
capabilities of litigation platforms to generate contested claims.
This tech-enabled claim instigation drives social inflation and
nuclear verdicts, making insurance less available and affordable.
Its ill-gotten profits encourage ever more litigation, exacerbating
the underwriting cycle and pricing challenges for insurance buyers
in the transportation and logistics sector.
Absent effective responses by targeted insurers,
tech-enabled claim instigation will continue to escalate, fostering
more litigation financing in an endless cycle. Demotech is proud to
be the only rating agency to connect the dots of litigation
platforms, SEO, litigation marketing, litigation financing, and
rising litigation frequency.
Understanding these factors allows for better
risk management and protection for Demotech-rated insurers serving
the transportation and logistics sector, safeguarding their
customers and shareholders.
About Demotech, Inc. (www.demotech.com)
Demotech, Inc. is a financial analysis firm specializing in
evaluating the financial stability of regional and specialty
insurers. Since 1985, Demotech has served the insurance
industry by assigning Financial Stability Ratings® (FSRs).
Demotech's philosophy is to review and evaluate insurers
based on their area of focus and execution of their business model
rather than on financial size. Demotech was the first to
review and rate independent regional and specialty Property and
Casualty insurers. Demotech's consistently expanding list of
accreditations and acceptances has resulted in rating and reviewing
460 insurers operating in the US. As of July
11, 2022, Demotech, Inc. is registered with the U.S.
Securities and Exchange Commission as a nationally recognized
statistical rating organization (NRSRO) in the class of ratings for
insurance companies.
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SOURCE Demotech, Inc.