In a recent article in Property Casualty 360 titled “Risk-based pricing remains the best option for consumers”, the leading advocate for the Property Causality Insurance industry stated that the best option for consumers is to have their insurance rates based on the probability that they will have an insurance claim, i.e. “Risk-Based Pricing”, and not on other factors such as income, race, gender, address, ethnic group, religion, marital status or nationality when determining their insurance scoring. We couldn’t agree more!
What is really interesting is this same group – The Property Casualty Insurers Association of America – are the ones leading the charge with state legislators across the country when it comes to capping the rates on what Consumer Legal Funding companies are able to charge, a measure that would either limit or fully eliminate the product.
They want the industry to follow a cookie cutter approach when it comes to addressing and pricing legal claims, but when it comes to their own product, auto insurance, they want to maintain the capability of pricing based on the probability of outcome, as opposed to a cookie cutter methodology.
Consumer Legal Funding companies NEVER take into consideration income, race, gender, address, ethnic group, religion, marital status or nationality when determining what is the best approach when approving funding for a consumer. They look at the validity of the legal claim and the probability of there being a positive outcome; the same way insurance companies determines the premium that consumers pay each month on their insurance bill.
So we ask again, why is it ok for the insurance industry to take risk into consideration and not the Consumer Legal Funding industry?
The article goes on to state that “Vermont enacted legislation this year with balanced measures to protect consumers and reinforce the risk-based insurance system.” In 2017, Vermont enacted legislation that also regulates Consumer Legal Funding. That piece of legislation clearly states that the consumer MUST be fully informed as to the charges, and that there can be no hidden cost associated with the product that the consumer is not fully aware of. In other words, full transparency to the consumer. No cookie cutter or one-size-fits-all approach.
We fully support the bill that was passed in Vermont.
Perhaps state legislators should give closer inspection to Vermont’s position with regard to the insurance industry, and apply those same principles to Consumer Legal Funding. A risk-based pricing model is indeed one that we should all fully support.