It is Time to Choose … Do You Support All Consumers or a Few Opportunists?

Steven Covey said “There are three constants in life … change, choice and principles.”

Each constant in life has been at work in the insurance sector for a long while, as evidenced by Demotech’s research project unearthing tech-enabled litigation instigation in the spring of 2022. Since about 2017, this previously covert online business model has used internet marketing, i.e., search engine optimization, pay-per-click, and other online tactics, litigation marketers, AI-driven litigation platforms, and sometimes third-party litigation funding, to further their efforts to transition claims to litigated status.

The result? Over the period 2020 to 2022, some carriers were litigated to death, including American Capital Assurance Corporation, which was dual-rated by Demotech and AM Best at our respective A levels. Concurrently, this business model destroyed the availability and affordability of insurance in jurisdictions throughout the United States, resulting in increased premiums for hundreds of millions of consumers. (I will share my opinion on the concurrent, interrelated changes in the legal profession in a future issue of The Demotech Difference.)
Demotech developed and sponsored the research undertaken by our first and only choice to do this, Todd Kozikowski. Kozikowski undertook our research project in 2022 and discovered the source of the “change” that had escalated litigation levels at industrial scale, destroyed a few carriers by targeting them online, and adversely impacted the availability and affordability of insurance throughout the country. Recognizing that the brute force and efficacy of the business model attracts third party litigation funding, Todd and I alerted regulators, trade associations, special investigation units, and carriers of the business model. To drown out our voice, the opportunists coordinated attacks on Demotech to distract from the proximate cause of the carrier insolvencies, and availability and affordability issues caused by the previously covert, unfettered execution of their business model.

On the “change” in claim activity, in 2022, Demotech’s research project, through Todd’s findings, identified the “change” that destroyed insurers, adversely impacted markets, and drew litigation funding at record levels: tech-enabled litigation instigation.

It was at this point that our “choice” was made. Based on the discovery of this previously covert online business model, Todd and I initiated an effort to educate those being covertly targeted online. You can stand with Todd and me to support consumers and the targeted through minimization or elimination of opportunistic litigation, thereby sustaining or enhancing the availability and affordability of insurance, or you can stand with the limited number of opportunists seeking to profit when they transition claims from being policyholder reported to contested or litigated, well before an insurer has had an opportunity to respond to its insured.

Since 2022, those who made the “choice” to support the few opportunists have distracted you from our groundbreaking research and the discovery of the business model that was the “something new” responsible for insolvencies, “nuclear verdicts” and “social inflation,” by attacking us.
Keep in mind that those who benefitted and will continue to benefit from this business model, are few. However, opportunistic law firms and those with billions to invest in litigation funding are two powerful, well-connected, and motivated groups who benefit from targeting the uninformed with their online business model. It is my opinion that those who attack us, the messenger, do so to sustain business as usual for the few by impeding the educational effort that was Demotech’s “choice.”

On Steve Covey’s third constant in life, “principles,” a definition is appropriate. The Merriam-Webster dictionary states “principle” is “a rule or code of what is right,” or “habitual devotion to what is right.” Although we have been attacked by many who have yet to comprehend the breadth, depth, and scope of what our research project unearthed, I place minimal blame on the attackers themselves. The reality is that this David has upset two Goliaths, the opportunistic few who built and used the online business model, and those who invest billions in litigation funding to profit from the efforts of the opportunistic few. Those attacking us have been fed misinformation, partial truths, and counterfactual assertions that make great headlines yet fold when seriously examined. Few have the time and expertise to seriously examine the facts; particularly when one of their constituencies repeats misinformation, partial truths and counterfactual arguments on a regular basis.

On “principle,” Demotech believes two thoughts are applicable. The first is that insureds can sue an insurer whenever they believe that they have been aggrieved. There is no need to utilize suit as a first notice of loss. Second, Demotech’s habitual devotion is to a financially stable, functional insurance market that prioritizes the availability and affordability of insurance for all consumers. Others have chosen to support an online business model that benefits the few who utilize it or profit from it.

We choose to stand with all consumers. Steve Acunto, whose opinion is presented on page 24, is an established insurance professional who has dug deep into the facts. He decided to stand with consumers and the insurance industry. Change is happening. Who you support is your choice. I encourage you to make sure that your choice is consistent with your principles.