A report commissioned by the Insurance Bureau of Canada (IBC) reveals growing concerns about litigation trends that could soon impact commercial insurance pricing. The report highlights the rise of third-party litigation funding in Canada, an unregulated practice where outside investors fund lawsuits in hopes of sharing in large settlements.
In addition, there’s a surge in class-action lawsuits, fuelled in part by aggressive legal advertising. These developments mirror patterns seen in the U.S., where litigation costs have significantly increased over time. IBC warns that if left unchecked, these trends could raise insurance premiums as insurers face mounting legal costs.
Ultimately, without regulatory reform, commercial policyholders could be the ones footing the bill. IBC is calling for government action to bring greater transparency and oversight to litigation funding and help stabilize insurance costs for Canadian businesses.
What Should Insurers Do?
- Stay Proactive: Track litigation trends and their effects on claims costs.
- Support Reform: Collaborate with regulators to bring structure to litigation funding practices.
- Educate Clients: Help commercial policyholders understand how evolving legal dynamics might change coverage pricing.
While Canada hasn’t yet reached the U.S.’s level of legal cost escalation, early signs of aggressive third-party funding and rising class actions are emerging. For insurers and businesses alike, thoughtful response and regulation will be essential to curbing cost pressures before they escalate into broader market disruption.
Read More On : Insurance Bureau of Canada