Why Do Ticket Resellers and Consumer Legal Funders Exist? Because Springsteen Cares and “XYZ Insurance” Doesn’t

I buy a ticket to see Bruce Springsteen for $150 and then resell it for $350. Why am I able to do this? Because the face value of a Springsteen ticket is artificially low. Bruce could set a higher price, but chooses not to. It’s a noble yet futile effort on his part to go easy on his fans. I say “futile” because ultimately the market will adjust the price to reflect its true value. As long as there are folks lining up to pay considerably more than face value, third party ticket resellers will remain incentivized to take advantage of the economic opportunity presented therein.

So what about “XYZ Insurance Company”?

Say I’m involved in a car accident where the at-fault driver is insured by “XYZ Insurance.” I make a claim against “XYZ Insurance” to recover for the injuries I’ve suffered in the accident. Reasonable minds agree that my claim is worth between $25K-$35K. However, “XYZ Insurance” offers to settle (“buy”) my claim for only $15K.

Like Springsteen, “XYZ Insurance” is setting an artificially low price, albeit for very different reasons, and thereby creating an economic opportunity for a third party – in this instance a Consumer Legal Funder. Keep in mind, even though “XYZ Insurance” is technically a buyer in this scenario, for much of its history it has been the only possible buyer. As such, it has enjoyed monopoly-like power in terms of price-setting; that is, until the advent of Consumer Legal Funding.

If “XYZ Insurance” objects to the rise of Consumer Legal Funding, it’s because funders have created a market for claims where none previously existed. Think about that. In this new market, “XYZ Insurance” faces competition. That’s good for consumers. It means claimants now stand a much greater chance of realizing the true value of their claims. Absent Consumer Legal Funding, the only buyer of a claim against “XYZ Insurance” is … “XYZ Insurance.”

A market of one is no market at all. Fortunately, Consumer Legal Funding helps establish a robust market, without which, we all suffer.

Dean Lipson

Covered Bridge