The concept of insurance has existed for thousands of years, dating back to early societies like the Babylonians, Greeks, and Romans. Modern insurance developed over the last few centuries, and began to reveal some of the pitfalls facing consumers. Those troubles have persisted over the last few decades, as the insurance industry has changed drastically, arguably becoming less consumer friendly.

Modern insurance began to take shape in 17th century Europe, in the form of property, business, and life insurance, mainly protecting against fire damage. But this first foray into comprehensive coverage wasn’t without its flaws. Insurance carriers would supply the insured with branded cards indicating they would be protected. However, during this period insurance carriers actually employed their own private fire departments, which would often ignore burning buildings if the owners couldn’t immediately verify they maintained a policy with the company.

In the 19th century, railways paved the way for accident insurance to address an increase in passenger fatalities. According to these policies, passengers would receive basic accident insurance along with their tickets. Still, second- and third-class passengers were required to pay higher insurance premiums because insurers considered them high liability.

Fast forward once more to the 1990s and the sea change that took place when private companies went public. These new big insurance companies became trillion-dollar entrenched defendants, making it difficult for consumers to fight for fair settlements. Data shows how insurers took a systematic approach to delaying and denying claims settlements in an effort to turn claims, once viewed as cost centers, into profit centers. According to A.M. Best data, in 1987 insurance companies paid out 71 cents of every premium dollar paid, but by 2014 payouts had dwindled to 57 cents of every dollar. Insurance companies figured out they could often get away with lowball, early-settlement offers when customers needed quick cash.

The historic timeline of insurance shows how insurers have maintained a big advantage over individual consumers. Even today, many Americans live paycheck to paycheck, and studies like this Harris Poll-Oasis Financial survey show many don’t have enough saved to cover an emergency.

That’s why consumer legal funding continues play a vital role for consumers across the country. Funding provides consumers the wherewithal to hold out for a fair offer from an insurance company. It also provides a lifeline to cover living expenses, medical bills, and other costs that lowball early-settlement offers often don’t. Consumer legal funding remains one of the best tools to fight for what’s fair and to level the playing field with insurers, who have historically held the upper hand.

Jeremy Kidd, a law and economics scholar at Mercer University’s Walter F. George School of Law, recently scribed an article for the legal publication Law 360 discussing how anti-market, pro-business protectionism is threatening American democracy.  In the article, he describes the difference between supporting pro-market ideologies established by free market theorist Adam Smtih and supporting pro-business initiatives that forward the interests of specific businesses and hurt consumers in the process.

In the article, he describes the difference between supporting pro-market ideologies established by free market theorist Adam Smtih and supporting pro-business initiatives that forward the interests of specific businesses and hurt consumers in the process.

Kidd calls out the U.S. Chamber of Commerce for pushing the business interests of their top donors–many massive insurance company backers–to the detriment of consumers.

In recent years, the Chamber has advocated for a ban on the use of consumer legal funding in states across the country, which could leave many personal injury victims without financial options when trying to pursue a fair claim. Consumer legal funding helps families replace lost income now, after an accident, so that they can meet basic household needs until their case settles.

From the article:

It is difficult, if not impossible, for victims to hold insurance companies accountable when victims must accept an insufficient settlement offer in order to avoid starvation, eviction or inability to obtain medical care. As in so many other areas of our lives, financial intermediaries have arisen to correct this market imperfection.

Kidd, who is a member of the ARC Advisory Council, is also one of the nation’s leading experts on the topic of consumer legal funding. His latest paper on the topic, Modeling the Likely Effect of Litigation Financing, which was published last year.

Check out the article on Law 360’s site HERE.

Read the full text HERE.

The hypocrisy of the U.S. Chamber of Commerce’s stance on regulation can sometimes be hard to stomach.

The organization is known for their firm opposition to regulations on businesses, lobbying for de-regulation at every turn, citing harm to the market and the economy. However, they are happy to push to impose regulations on small business if it’s in the interest of their members—huge insurance companies like State Farm and Allstate—unconcerned that it would hurt everyday people in the process.

In a recent op-ed out of Alabama, U.S. Chamber Institute for Legal Reform president, Lisa Rickard, derides consumer legal funding (which she intentionally mischaracterizes as “lawsuit loans”) by spouting glaring falsehoods (too many to even address properly in one blog), slinging mud, and pushing a bill that would hurt consumers in that state.

ARC Executive Director Rob Johnson just wrote a measured but biting response in The Gadsden Times titled “More bureaucracy, less choice? What is U.S. Chamber thinking?” calling out the Chamber for being so out of touch with the people of Alabama—and people across the country:

The November election revealed an overwhelming tide of people who felt left behind by the system and invisible to policymakers. These are people who go to work every day and just want to forge the best lives they can for their families. The voice of Alabamans rang loud and clear — they want less government, not more bureaucracy. They want more choices for their families, not fewer… Overregulation is not consumer protection. It’s just out of touch with the voices of voters and leaves people behind.

It’s recommended reading for President Rickard.

The legislation she is pushing for her industry backers is not only a wolf in sheep’s clothing, but goes against the sentiments just expressed by Alabama voters in November. It’s a good thing legislators have been good shepherds the last few times she’s tried to hurt their Alabama constituents.

Check out Rob Johnson’s response HERE.

Cycle of debt—three little words that strike fear in the hearts of every financially independent adult. It’s something that we all work hard to avoid. We all want to be Beyoncé when it comes to money.

 

But with 73% of us living paycheck-to-paycheck, it’s something that is oh so easy slip into.

And a cycle of debt can be crippling, not only because of the continued bite it takes out of your paycheck, but because it can put you one illness, accident, or job loss away from badly damaged credit, collections, and even bankruptcy.

That’s why using a credit card can be so dangerous if you don’t have a guaranteed, steady, and robust income.

Here’s an example:

Say you take out a credit card with 26% interest and charge $2,000. If you make the standard 4% minimum payment—$80 every month—it will take you 10 years and 6 months to pay off in full.

Another example:

You have credit card with 36% interest and charge $2,000. If you make the standard 4% minimum payment—$80 every month—it will take you a whopping 17 years and 9 months to pay off in full.

Now, that’s IF you can make the monthly payments in full EVERY MONTH. Sometimes that is a hard thing to guarantee.

Accidents, for example, can cause injuries that can threaten a person’s ability to go to work and earn a living as they usually do. Some people just need time to recover, others need surgery. Still others are injured permanently and need to either change careers or are unable to work at all.

And being compensated after an accident can take time. The more severe the injuries, the longer an insurance or legal claim is likely to take to reach a settlement.

That leaves people in a bind, and unable to make ends meet.

According to a recent Harris Poll survey, 62% of Americans would struggle to meet BASIC HOUSEHOLD NEEDS without 3 months of income.

So what do you do? Put it on a credit card?

Maybe, but that can be very dangerous if you’ve been in an accident, are pursuing a legal claim, and don’t have regular income. One missed payment and can damage your credit and put you on the road to bankruptcy. People often take out loans to pay off other loans, creating a cycle of debt.

That’s why maintaining access to consumer legal funding is so important.

Consumer legal funding gives people a choice to replace lost income now by selling a small part of their future anticipated recovery. Because it’s a purchase, it doesn’t create debt, isn’t connected to consumer credit, and can never put someone in collections or bankruptcy.

There’s no monthly payment, which is great when there is no other income coming in. And all costs are spelled out in dollars and cents—no interest calculations. All payments come from the settlement, so if something goes wrong with a case, nothing has to be paid back—even the funding. Nothing.

It’s a product specifically designed to help people in this situation, and something that is much safer for consumers than putting expenses on credit cards.

People should have options to avoid cycles of debt. Consumer legal funding is one of those necessary options.

 

Source: Credit card payoff calculations made with Bankrate.com’s online calculator.