The “Tort Reform” Racket
How the insurance industry is stripping your rights and making historic profits
By Rick Morris
TL:DR The insurance industry is denying more and more claims and running a nationwide strategy to deny your right to sue them when you’re shortchanged.
If you follow how state governments around the country are responding to the insurance crisis like I do, the one phrase you’ll hear more than any other is “tort reform.” Sounds nice, right? But the reality is that tort law is the only real leverage policyholders have when insurers stall or shortchange them.
A “tort” is the legal term for when a person or a company harms or injures someone. Tort law simply is the legal framework people can use to sue when that happens. So-called tort “reform” includes capping damages, shortening filing deadlines, restricting who can sue, and denying people’s right to sue a company altogether.
Public Citizen has been fighting corporate-backed “tort reform” for decades across industries. Without fail, tort reform efforts are an attempt to shield corporations from justice and pad their profits.
A real climate crisis and a manufactured legal one
Our current insurance crisis is a product of climate-driven extreme weather that is more frequent, more destructive, and more expensive—not lawsuits. Wildfires fueled by heat and drought plague the West. Hailstorms batter the Midwest. Hurricanes grow stronger and reach farther inland, while catastrophic flooding now affects places from Texas to Vermont to New York City. Many communities are still recovering from one disaster when the next one hits.
Instead of strengthening protections for policyholders, insurers are raising rates, cutting coverage, abandoning communities, and denying claims. Renters feel the effects through higher rents. Homeowners often learn only after disaster strikes that coverage was quietly reduced.
This is a real insurance crisis for working Americans. According to Insurify’s 2026 survey, more than half of homeowners (57%) have made sacrifices to afford home insurance, including taking on debt (15%), borrowing from friends/family (12%), and skipping meals (10%).
“Social inflation”: insurance industry’s fabricated scapegoat
In order to justify rate hikes and strip us of our right to due process, insurers blame “social inflation” for rising costs. “Social inflation” is an industry-coined term used to pin rising costs on lawsuits, juries, and trial lawyers. According to their narrative, out-of-control lawsuits and runaway verdicts force them to raise rates.
The idea that judges and juries nationwide are being routinely duped by plaintiffs’ attorneys who somehow outmatch the trillion-dollar insurance industry and its legal teams strains credulity. A far more plausible explanation is the simplest: insurers frequently deny, delay, or underpay valid claims, and reasonable people turn to the courts. This isn’t legal system abuse, it’s a policyholder’s last line of defense against a racket.
Denying claims and blaming the courts
When I dug into the insurance industry I found startling statistics. While insurers complain about litigation, they are increasingly refusing to pay claims at all.
- Weiss Ratings found that in 2024, 14 of the largest U.S. property insurers closed between 40% and 51% of homeowner claims with no payment whatsoever.
- More than one-in-three weather-related claims go unpaid on average.
- In Florida, claims denials grew by 17% from 2022 to 2024 to a record high of 46.7%.
In his landmark book, Delay, Deny, Defend: Why Insurance Companies Don’t Pay Claims and What You Can Do About It, Professor Jay Fiemann details how the industry prioritizes profits over policyholders’ needs, often using tactics like delaying or denying legitimate claims to bolster financial performance. It’s no wonder, then, that insurance companies want to take away our legal right to contest them.
The industry is pushing “tort reform” throughout the country
Louisiana recently passed sweeping “tort reform” laws, and Florida went as far as to deny people who use the industry-run “insurer of last resort” the right to sue entirely. Instead they have to go through a mandatory arbitration system staffed by “judges” paid by the insurance companies themselves.
Unsurprisingly in Florida the insurance company wins in arbitration 90% of the time, and in Louisiana people’s rates continue to climb as insurers pay out fewer claims.
Even independent ratings agencies suggest the industry’s greed has undone these attempts to reduce lawsuits. Dr. Martin Weiss, founder of Weiss Ratings, reports that in Florida “the data indicates that many insurers, perhaps assuming that tort reform would help them get away with abusive practices, denied claims more aggressively, causing more, rather than fewer, lawsuits overall.”
These “tort reform” efforts are promoted by the insurance industry in virtually every state capitol.
Giant insurance corporations and industry groups put tort reform at the head of their lobbying agendas. The industry’s association for insurance agents tries to get its members to use this “legal abuse” toolkit to lobby for the same. These efforts are backed by a “tort reform bootcamp” for legislators from the powerful right-wing Koch-funded legislative clearing house called ALEC.
Even the National Association of Insurance Commissioners (NAIC), the industry-funded organizing body of all our state insurance regulators, promotes these so-called “reforms,” including them in their “Affordability and Availability Playbook” for legislators looking to combat rising housing costs.
If successful, the insurance industry will have stripped Americans of a fundamental right to access our judicial system and taken a key protection of many Americans’ most important financial asset and turned it into a racket.
The numbers don’t support the industry’s claims
Despite their clamor for special protections against our right to sue, these corporations are enjoying historic profitability.
In its 2025 report on U.S. homeowners insurance markets, the Treasury Department’s Federal Insurance Office (FIO) examined paid loss ratios—claims paid relative to premiums collected—across 25,593 zip codes from 2018 to 2022. In more than 90% of zip codes, insurers collected more in premiums than they paid out in claims every year. Underwriting has been profitable in most of the country, and across the states insurers made 3.7 times their underwriting income in their investments. In Louisiana that ratio climbs to $55 in gains on their investments for every one dollar lost in claims.
The industry’s broader financial performance proves the business insanely lucrative. According to the NAIC, the P&C industry posted $169 billion in profits in 2024, a 90% increase from 2023 and a 333% jump from 2022—marking its 23rd consecutive profitable year. Even the NAIC acknowledges these extreme profits were “made possible largely due to sizeable rate increases.” Insurance CEO pay likewise continues to climb year over year.
Insurers make most of their money by investing the premiums we pay in stocks, bonds, and real estate, including around $582 billion in coal, oil, and gas. They also insure the coal mines and methane export terminals driving the climate crisis. In short, they make unfathomable sums propping up the very industries creating the disasters that threaten our homes.
Not reform but a racket
Nearly 1 in 3 homeowners (28%) say they would drop their mandatory home insurance entirely if possible. Instead, they’re paying more for less. Premiums are up 24% nationwide, and when someone does make a claim, which just as likely will pay out as won’t, their premiums increase even more.
So-called tort reform takes away Americans’ fundamental rights, supposedly in exchange for lower premiums. But those savings never arrive. It turns a required product into a racket: pay more, get less, and lose the ability to fight back.
At a time when climate change makes accountability more urgent than ever, the answer isn’t closing courthouse doors. Real solutions strengthen consumer protections, increase transparency, and hold insurers accountable for their role in fueling risk—not strip rights from the very people insurance is supposed to protect.