No. Litigation funding does not contribute to social inflation. Blaming litigation funding as a cause of social inflation and the rise of insurance costs is a false narrative driven by insurance companies.
Litigation funding companies help plaintiffs obtain larger payouts from insurance companies. Litigation funders are actually giving those plaintiffs in need the time and resources needed in order to get fair value for their injuries and damages.
Insurance companies paying fair value for settlements is a benefit to all insured parties and does not lead directly to a rise in the cost of insurance.
There are multiple factors that contribute to the rise in insurance premiums, and litigation funding does not play a large part in that process.
Factors that contribute to the rise in insurance premiums.
Inflation is what raises the cost of goods and services, which in turn increases the cost of insurance premiums.
The federal reserve raises rates which causes the price of goods such as milk, bread, and gasoline to go up along with those staple items service costs go up.
As things get more expensive in the general economy, so do insurance premiums because they are based on bond rates. Insurance companies invest premiums into bonds to make money and as rates go up, the cost of those bonds goes down.
Because the insurance company will show capital depreciation based on those reduced spot prices of the bonds they have to raise insurance premiums to make up the difference.
Insurance companies exist so that premiums make more than whatever they have to pay out in claims. Insurers are in business to make money, not to help people.
