Arkansas Trucking Association Informed of Tech-enabled Claim Instigation

On November 7 and 8, 2024, the Arkansas Trucking Association hosted its annual Safety Summit in Little Rock, Arkansas. In addition to the range of traditional litigation issues adversely impacting the cost of transportation and logistics insurance, Joseph Petrelli, president, Demotech Inc., advised the safety, risk management and legal professionals in attendance of tech-enabled claim instigation; and the confluence of search engine optimization, litigation platforms, litigation marketing and third-party litigation funding harnessed by plaintiff firms and public adjustors to re-direct online internet traffic for the purpose of securing contested claims against third parties, including transportation and logistics companies, insurers, and most any well-known brand.

Undertaken in March 2022, after Demotech completed its internal post-mortem, a research project was developed to investigate the insolvency of several Florida-focused insurers that appeared to have been litigated to death. Petrelli thought this to be the case because despite consistent market share over the period 2017 through 2021, whether measured by direct premium written or policies in force; the eight carriers that failed, including American Capital Assurance Corp., dual-rated at an A level by Demotech and A. M. Best, experienced hockey stick growth in new annual litigated claims over the period.

Demotech had issued nearly a thousand rating opinions of Florida residential property insurance writers since its effort to assist the state of Florida depopulate the Florida Residential Property Casualty Joint Underwriting Association in July, 1996. It’s review procedure had successfully navigated judicial decisions that reversed decades of claim protocol precedent, anticipated the radio, TV and billboard advertising in Florida, and withstood dozens of hurricanes and tropical storms that made landfall over the nearly three decades since their initial involvement in Florida. As such, it was Petrelli’s instinct that the meteoric rise in new, annual litigation that led to carriers being litigated to death involved a new phenomenon.

Petrelli further explained that after re-reviewing the statements of actuarial opinion as regards loss and loss adjustment expense reserves, independent audits, sworn annual financial statements, and quarterly financial statements of these insurers, he was convinced that door-knocking, TV, radio and billboard ads alone could not have increased contested claims at the meteoric growth reported.

In an effort to investigate the potential existence of a new phenomenon as the proximate cause of the demise of these eight carriers, Petrelli contacted technologist and data scientist, Todd Kozikowski, whose experience in the insurance industry augmented his analytical capabilities to review online activity associated with these carriers. Petrelli’s instincts proved to be accurate.

Kozikowski’s first finding was a relatively small public adjusting firm utilizing search engine optimization and pay-per-click activity to target specific insurers. This firm’s annual budget for this was nearly $650,000 (2022 dollars), and this effort generated inorganic traffic that was more than 70 percent of the site’s traffic. Kozikowski’s subsequent findings revealed that numerous national law firms were spending in excess of $1,000,000 per month targeting dozens of insurers by purchasing key words and utilizing pay-per-click activity to re-direct searches to their firms, and away from the insurance companies whose names and key words were being utilized to target.

Having verified Petrelli’s theory that an anomaly had a role in the acceleration of litigated claims targeting Florida focused insurers; i.e., online technology and search engine optimization to supplement door-knocking, TV, radio, and billboard advertising; Kozikowski dug deeper.

He identified the business model that he and Petrelli labeled “tech-enabled claim instigation.” Ominously, the business model was in place and utilized coast-to-coast, line of insurance by line of insurance, and targeted most established brands. Whether insurers or not, Kozikowski found that beyond insurers, virtually all visible brands and deep pockets, including transportation and logistic carriers, were targeted. The opportunists had figured out how to eliminate the “middleman” of insurance, and directly target those that purchased insurance. No business in the country was immune from direct or indirect targeting.

Since his discovery of tech-enabled claim instigation, Kozikowski has formed 4WARN Inc. to assist any company being targeted to remediate their exposure to targeting. The 4WARN site notes that “Claim instigation, backed by technology, funding, marketing and search engine optimization has escalated litigation, claim frequency, and claim costs. As a result, the increased expense of services across all industries has placed immense pressure on small businesses, pushing some to closure, and impacting the profits of larger organizations.” He has no ownership interest in 4WARN. The recognition is ceremonial as his instinct of carriers being litigated to death was accurate.

Importantly, in his concluding comments, Petrelli noted that as a courtesy to the Transportation and Logistics sector and the findings emanating from Demotech’s research, 4WARN will periodically monitor the targeting of all insurers writing commercial automobile liability that are uniquely rated by Demotech. This courtesy by 4WARN adds a layer of protection to the utilization of Demotech-rated carriers that other insurer rating agencies have not addressed.