First, if you didn’t see the post on corporate governance earlier in the week, take a look!
Second, if you don’t remember, what an IANS ALERT is, I covered it here and here. The short version is when there are significant claims events out there in the system that insurance companies tend to turn a blind eye to, I issue an IANS ALERT.
Class Action Infomercials Have Arrived!
I was flipping through the DirecTV guide and what do I come across on Channel 203? A program called “Did Talcum Powder Cause Your Cancer?”. Yes, the plaintiff’s bar has graduated from 30 second spots to 1 hour long informercials!
Brief recap for those who haven’t been following the news. J&J has been blamed for cancer outcomes related to the talc in baby powder. The scientific evidence is questionable for sure, but that doesn’t matter when a good lawyer is involved! They’ve lost a number of cases including one for $4.7B!
The plaintiff’s bar see $$$ and starts canvassing for claimants. We all know the ads? “Do you have (any form of) cancer? Have you used (baby powder/Roundup/prescription drugs)? You may be entitled to damages! Call NOW!”
Well, a law firm called Paglialunga & Harris has raised the bar. They have made hour long informercials to find clients! They’re actually about 5-10 minutes long and just loop repeatedly over the hour. They are on my guide 5 or more times a day (over two channels).
And They’ve Very Convincing
If you know nothing about talc, the program comes across as highly convincing! They have a slick host and a “doctor” (I’m sure she’s really a doctor but when you google her she works for attorneys on talc, Roundup, and hernia mesh = I’m not sure when she has time for real patients). She is full of devastating facts and confidence. You want to believe her. If you had ovarian cancer, you would call the number without a doubt.
It is way more persuasive than the 30-second commercials (“did you use baby powder? do you have cancer? Call now!”). She tells you all the horrible things J&J did to give you your cancer. She tells you how much money others have won in court.
Also, you have no idea the phone number is for a lawyer. My guess is a layperson thinks they’re calling for medical help. The small print doesn’t even say anything about a legal firm. It’s not until the end of the program that there’s a brief black screen that, if you pause it, you can see the name of the law firm. Very slick!
This is highly polished stuff. People will call and the law firm rep who answers I’m sure has a script that convinces the caller baby powder gave them cancer. Next thing you know, you’ve signed up to be a plaintiff (as long as you give half of what you win to the law firm). And insurance companies will proclaim they are shocked when they get presented with full limit liability claims.
Tort Claims Are About to Get a Lot Worse
It’s hard to get good data on the cost of an informercial but $10,000/hr seems in the ball park. It’s on pace to run 150-200X in a month if they keep this up, so that’s up to $2M of ad spend in the hope someone who has ovarian cancer (and has used baby powder during their lifetime) will call the number. They wouldn’t be spending that kind of dough if they weren’t confident they were going to win a lot of cases! Remember, this is just one law firm!
Now, I know J&J doesn’t have insurance for talc claims but that is besides the point. The point is, if this campaign is successful, there will be more informercials for other torts!
That’s what the ALERT is for. Lawyers are going to get better at generating (spurious) claims. This is not something actuaries are accounting for in their estimates. They have no idea it’s even a risk (until now – you’re welcome)! This means the CEO & CFO can still go on the earnings call and say they’re not seeing any pressure on reserves. Don’t believe it! Worse is yet to come.