The Impact of Attorney Advertising on Auto Insurance Costs: A Deep Dive

Consumer Perceptions and the Role of Attorney Advertising

A recent survey by the Insurance Research Council (IRC) reveals that a majority of consumers believe attorney advertising increases both the number of claims and the cost of auto insurance. This perception is not unfounded, as studies have shown a correlation between increased advertising and higher legal costs. For instance, the American Tort Reform Association (ATRA) estimates that in 2023, over $2.4 billion was spent on local legal services advertising, a significant portion of which was dedicated to personal injury and mass tort cases.

Litigation Financing and Its Influence on Advertising

The awareness of litigation financing has risen, with many consumers expressing a desire for transparency regarding third-party involvement in lawsuits. This is particularly relevant as the average loan from third-party litigation funders (TPLF) to law firms ranges from $20 million to $100 million, with returns as high as 20 percent for high-risk mass tort litigation. The Wall Street Journal reported that nearly 800,000 television advertisements for mass tort cases ran in 2023, costing over $160 million, highlighting the financial incentives driving this surge in advertising.

State-Level Impact and Future Considerations

The impact of increased attorney advertising and litigation financing is particularly pronounced in states like Georgia, Louisiana, and Florida, where auto insurance affordability is declining. Georgia, for example, ranked 47th in auto insurance affordability according to an IRC report in August 2024. To mitigate these effects, stakeholders suggest greater transparency and regulation of litigation financing, as well as public education on the potential impacts of attorney advertising on insurance costs.