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Getting a handle on rising claims litigation costs and frequency

Litigation continues to be a major contributor to rising claims costs, and the issue is only getting worse. Recent studies have highlighted a trend of claimants hiring attorneys more often and earlier in the claims process, which ultimately leads to higher costs to resolve claims.

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Increasing litigation has coincided with rising litigation expenses, making it more critical than ever for insurers to develop effective legal strategies to manage these cases and contain costs.

Costly claims litigation trends

The data paints a troubling picture for insurers regarding claims litigation. According to one study, attorneys were involved in 55 percent of litigated auto claims and 54 percent of general liability claims at first notice of loss.

Once attorneys become involved, expenses tend to increase. Defense and cost containment expenses accounted for 12.8% of incurred losses in 2019. The trends in commercial auto are even more unsettling, where the average cost to resolve a claim is 34 times higher when an attorney is involved.

Along with increased litigation comes social inflation, which is the increase of expenses and claims losses due to litigation and larger jury awards. Again, the trend significantly impacts commercial auto claims, where social inflation added $20.7 billion to claims costs between 2010 and 2019, according to the Insurance Information Institute.

Data-driven insights deliver better outcomes

What can insurers do to combat these negative trends? First, try to prevent the claim from progressing to litigation. That means using tools and strategies for fast and fair claims resolution. But if a claimant does file a suit, it’s crucial to have the right defense counsel and strategy.

Taking a data-driven approach in selecting an attorney is critical. These days, litigation analytics tools provide in-depth insights to help you choose defense counsel. It analyzes attorney performance data based on case type, jurisdiction, closure time, and more. Analytics can also provide insights into how presiding judges ruled in similar cases.

Those insights can help you identify counsel best suited to handle your case and potentially improve the outcome. Litigation analytics can also help capture and analyze your historical case data to help you make better-informed settlement offers and trial decisions.

As claims litigation increases in frequency and costs, it’s important to get a handle on it. Legal analytics provide data-driven insights to help you contain litigation costs and improve case outcomes.

Verisk is developing a suite of legal analytics tools to help insurers navigate the changing claims litigation landscape. To learn more about these solutions, contact Stephanie.Fox@verisk.com.


Stephanie Fox

Stephanie Fox is the Senior Director of Legal Case Management, Casualty Solutions at Verisk. You can contact Stephanie at Stephanie.Fox@verisk.com.


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