Litigation insights offer the key to rising claim costs

By Tamara Flinn  |  November 15, 2019

Insurers are constantly seeking ways to enhance efficiency and contain costs in claims operations. Sure, technology has helped streamline processes and reduce some expenses, but many carriers still struggle to manage litigation claims.

No matter the line of business—when a claim involves litigation, it typically drives up costs, extends cycle times, and ties up staff resources. And with the cost of claims and legal defense on the rise, insurers can no longer afford to chalk up exorbitant litigation expenses as the cost of doing business.

Claim and litigation costs continue to increase

Containing claim costs remains an uphill battle for insurers as claim severity increases year over year. The Insurance Research Council reports that from 2008 to 2017, the average bodily injury claim payment grew 31 percent, and personal injury protection (PIP) claim payments grew 26 percent.[1] On an annualized basis, injury claim loss costs have outpaced inflation.

Litigation only adds to those costs. Consider this: 52 percent of bodily injury claimants hire attorneys.[2] And if you can’t settle claims pre-suit, defense counsel fees can run upward of $51,000 for senior attorneys.[3]

In workers’ comp lines, legal costs account for 14 percent of losses.[4] And claims that include lost time from work can cost three times more when attorneys are involved.[5]

Inefficiencies in handling litigation claims

Rising claim and litigation costs are just one facet of the problem. Litigation management is the other. And claims departments are facing increasing pressure to improve strategies and protocols in this area.

According to a Claims and Litigation Management Alliance study, 75 percent of insurers said senior management is paying closer attention to the effectiveness of their litigation management.[6] When you consider cost of litigation, no wonder these processes are coming under scrutiny.

Part of the problem stems from how adjusters handle litigation claims. Because these claims tend to be more complicated and costly, adjusters often overanalyze them. Instead of continuing to work toward swift resolution, adjusters tend to be more cautious and rehash steps in claim evaluation. It ultimately wastes time and hinders settlement efforts. In fact, 80 percent of respondents in the CLM study said most litigated claims settle later in the process than necessary.[6]

Insurer legal data is full of untapped potential

One of the reasons insurers struggle with litigation claims is because of inconsistency. Yes, litigation claims are different from claims that don’t involve attorneys, but they’re not much different than the thousands of litigation claims an insurer has processed and settled in the past.

Within every insurer’s historical claims are a litany of suits, settlement offers, and court decisions for various types of claims. And many of those claims often involve the same plaintiff attorneys. Hidden in that data are valuable trends and insights that can help insurers improve their litigation strategy and streamline processes. But insurers have struggled to properly analyze and operationalize that data for their benefit.

Litigation insights can improve claim outcomes

Imagine the types of insights an insurer could gather from years’ worth of litigation claims data. For example, they could find out information such, where in the negotiation process they usually settle, their average case duration, and their case outcomes by line of business.

That information is a game changer because it may eliminate some extra work. Adjusters can start with a frame of reference of how an attorney tends to negotiate based on historical data. It can help them make more well-reasoned offers, expedite negotiations, reduce cycle times—and avoid costly trials.

Legal data can also help adjusters take a standard approach to litigation claims, so when they receive suit papers, they can process the claim and negotiate with greater consistency and confidence.

Get an edge with legal analytics

Fortunately, these data applications aren’t just theoretical. New solutions make it possible for insurers to derive actionable insights from legal data to improve claims handling and litigation outcomes.

These solutions analyze historical claims data to predict attorney behavior (both plaintiff and defense counsel), evaluate settlement offers, and determine potential case outcomes. Armed with this information, adjusters can pursue resolution in a manner that saves time and contains costs.

ISO Claims Partners has litigation analytic tools that are built off an insurer’s own historical claims data. These tools seamlessly integrate into an adjuster’s workflow through Liability Navigator®. To learn more or to schedule a demo, contact me directly at tflinn@verisk.com or +1-803-622-8714.

____________________________________

[1]. https://insurance-research.org/sites/default/files/downloads/Trends%20News%20Release%2002192019.docx_.pdf

[2]. https://www.claimsjournal.com/news/national/2018/04/23/284266.htm

[3]. Estimating the Cost of Civil Litigation, National Center for State Courts

[4]. https://www.iii.org/sites/default/files/docs/pdf/insurance_factbook_2017.pdf

[5]. https://riskandinsurance.com/litigation-tripled-lost-time-claims/

[6]. 2019 CLM Litigation Management Study


Tamara Flinn

Tamara Flinn is the director of product management for ISO Claims Partners. She oversees Liability Navigator as well as product development, new customer implementations, and product and customer support. Tamara has more than 15 years in personal auto liability claims and management and 5 years in consulting. She works in the Columbia, South Carolina, office.