According to Todd Kozikowski, Co-founder, CEO, 4WARN, nearly all insurers and lines of insurance are now being targeted by tech-enabled claim instigation, a phenomenon once considered confined to Florida.
In March 2022, Demotech’s research, undertaken by aforementioned Kozikowski and authorised by Joe Petrelli, President and Co-Founder of rating agency Demotech and an Industry Advisor to 4WARN, uncovered tech-enabled claim instigation, a countrywide business model that harnesses search engine optimisation, litigation financing, and litigation marketing to leverage the AI capabilities of litigation platforms to secure contested claims.
“When Joe Petrelli reached out to me regarding the acceleration of contested claims in Florida for several carriers that became impaired, I assumed this was a local weather-induced, geo-centric event,” Kozikowski commented in a new primer on that research.
He continued, “However, investigating the targeting tactics of opportunists led to a nationwide discovery: nearly all insurers and lines of insurance are being targeted.
“Additionally, the business model of tech-enabled claim instigation was confirmed for the insurance industry as well as nearly every industry. Today, Arizona and other jurisdictions that authorize alternative business structures may be opening the flood gates.”
According to the primer, the business model is also a proximate cause of social inflation, nuclear verdicts, and the availability and affordability of insurance.
“The success of the business model we call tech-enabled claim instigation attracts litigation financing, exacerbating the underwriting cycle and the pricing challenges facing consumers. Absent effective responses by insurers being targeted, tech-enabled claim instigation will continue to escalate, and additional litigation financing will be attracted by the success of the business model,” 4WARN’s primer explained.
The 2022 research also confirmed that insolvencies of Florida-focused property insurers occurred because they were likely targeted to death by litigation emanating from tech-enabled claim instigation.
“Similarly, we believe that the research to date confirms that this business model is in place in all states and all lines of insurance,” 4WARN reiterated.
The firm added, “Demotech had the insight to recognise that a new as yet unidentified facet of litigation was driving litigation to record levels at an extraordinary rate, as evidenced by the growth in new, annual litigation associated with a few failed, and likely targeted, carriers.
“Demotech’s postmortem and subsequent decision to retain Kozikowski to undertake pioneering research discovered tech-enabled claim instigation. Absent this discovery, the business model would continue to target carriers, utilising natural disasters to stealthily exacerbate availability and affordability in coastal areas.”
4WARN’s primer went on, “However, under Kozikowski’s leadership, Demotech’s research uncovered the multiple components of tech-enabled claim instigation. Today, in response to the success of the business model of tech-enabled claim instigation, litigation financing is exhibiting prolific growth. The business model has proven that it works.
“Investments in litigation financing are increasing due to the success of the business model. Litigation financing is jumping on the tech-enabled claim instigation train; it is not the conductor of the train.
“Demotech, Inc. is proud to be the insurer rating agency that connected the dots on litigation platforms, search engine optimization, litigation marketing, litigation financing, and increases in the frequency of litigation.
“Nuclear verdicts, social inflation, and the availability and affordability of insurance crisis can now be placed in perspective.”
Back in June of 2023, our sister publication, Artemis, spoke with both Petrelli and Kozikowski in a video interview which you can watch below.
All of Artemis Live’s video interviews have a focus on reinsurance, ILS and the efficiency of risk transfer and can be accessed directly from this YouTube Channel.
You can also listen in audio to these interviews by subscribing to the Artemis Live podcast here.
