The rise of contingency fees (they call them success fees) has created a bit of a tort mess in the U.K. (via Business Insurance).
The United Kingdom government this week launched a public consultation on proposals to revise the rules governing civil litigation costs, including changes to success fees and so-called after-the-event insurance.
After-the-event insurance is purchased after a dispute begins. I’m not familiar with it, but from an actuary’s viewpoint, it would remove one layer of uncertainty (frequency – the probability that a claim could occur), leaving only severity – the size of the loss to be paid. As such it would be easier to price.
Of course, here in the U.S. we are expanding the contingency idea, as this New York Times article (which I linked to yesterday) documents.