So the plaintiff shouldn't have anything at risk, but it's okay for the defendant to have his livelihood on the line? Nice sense of fairness you've got there.
The defendant will always offer a settlement in any reasonable case—any business has something to lose and thus will act to minimize risk by settling. The only plaintiffs who get punished by an automatic "loser pays" rule are those who have frivolous cases, or those who obstinately pursue the lottery payout rather than settle for reasonable compensation for actual damages. Those people deserve to be punished. Loser pays is the only way to go.
Where do you get the idea that there's nothing at risk? In the system I've proposed, if the judge or jury deems the plaintiff's case unreasonable, then they pay. That seems a reasonable level of risk. It weeds out the most frivolous suits, without unduly closing off access to the justice system. You don't want to make the risks so high that legitimately wronged people with reasonable cases are afraid to seek justice for fear they'll be ruined. That's not what the justice system is supposed to be about.
I'd like to see one more change as well, to help weed out frivolous suits, though I have a feeling it's not a very practical one. I'd like to see the burden of proof in civil trials raised to the same "beyond a reasonable doubt" standard that we have in criminal trials. Whether a defendant is facing jail-time or financial ruin, his accuser should be forced to prove it beyond a reasonable doubt, in either situation, IMO. None of this sliding by with a "preponderance of the evidence" that we have now.