Alabama liability insurance claims costs surged as lawsuits and large verdicts increased, report finds

By Sherri Blevins

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.

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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.

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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.