Author Archives: Suzanne Ganier

Getting Creative And Reducing Claim Costs Without Sacrificing Quality – Part II

Posted on by
3

Building blocks on which to create a new foundation to improve processes

Last month, I discussed the building blocks needed to reduce claim and litigation costs, while still maintaining a strong focus on quality. Those building blocks included:

  • collecting current data about your claims and litigation
  • evaluating the claim and litigation work itself
  • settling on a carrier claim and litigation handling philosophy

These building blocks create a foundation on which to build new processes and procedures that will reduce your claim and litigation costs, and maybe even decrease you volume as well. I refer this building process as looking at What I Have, What I Want, and What I See.

What I Have – All This Data

The data you collected regarding the current state of your claims and litigation is an excellent starting point. Examine your data and identify the areas that you wish to improve.

For a couple of reasons, while the amount of your legal spend may a visible target for improvement, don’t spend too much time on rate-issues first.  This is because the impact of improved processes and procedures will likely decrease total spend naturally, without having to address rate issues. Focus instead on issues like overall litigated volume (the number of pending litigated claims), cycle time (the average amount of time litigated claims take to close from inception), severity (of your pending litigated claims), and other factors. Developing processes and procedures that improve these other factors is a good starting point.

What I Want – Creating The Benchmark

Look again at your non-dollar data. Think about what you believe those numbers should reflect. For instance, if the average time it takes a litigated claim to go from inception to closure is two years (730 days), you know that, on average, you will be paying panel counsel for two years to bring that matter to a close. Based on your knowledge and you your industry contacts, determine whether this number appears high. Do this for other non-dollar metrics that you have measured.

Look at each area you wish to improve and consider a practical benchmark and goal you would like to achieve. My advice is to not set arbitrary goals, as they bear no particular relation to what you will be able to achieve, and thus set your organization up for disappointment or worse. Instead, work with stakeholders in the process and think about how your metrics work together to form a complete picture.

Set incremental measurement points. Hypothetically, you may be starting with a two year cycle time and wish to set a benchmark objective of reducing that by six months, followed by a long-term goal of reducing it to one year. Again, always make sure that your objectives align with the other information you are obtaining. Do your objectives make sense in light of the jurisdiction, the severity of the portfolio, the type of case, and the claims handling philosophy of your organization?

You may have a very diverse book of cases and wish to develop benchmarks and goals first by line of business, or by stakeholder. In fact, when you start objectively considering all of the factors involved, you may end up with benchmarks and goals that look something like this:

  • Overall Litigated Claim Pend Time – Current Average: 730 days
  • Motor Vehicle Accident (simple): 550 days (benchmark); 365 days  (goal)
  • Product Liability 700 days (benchmark); 650 days (goal)
  • XYZ Claim Professional 680 days (benchmark) ; 600 days (goal)

These numbers are purely arbitrary for the sake of example, but they are illustrative of processes you may wish to consider when examining your current situation and deciding how you’d like them to look in the future.

What I See – You Have To Look At What Is There

A continual focus on quality is critical. Higher-quality claim and litigated file management results not only in lower indemnity payments, but in decreased costs as well. As someone who has managed thousands of files with bad faith allegations, there is nothing more expensive than trying to successfully litigate a poor quality claim file.

One of the core building blocks of the process are evaluations – evaluations of all professionals involved in your litigation life-cycle, from claims professionals to attorneys. In looking at those evaluations (whether through internal or external audit), identify those practices that need to stop and those that are more likely to extend the cycle-time of your cases.

A simple example — in reviewing a number of litigated claims last year, I noticed a consistent pattern of defense counsel granting numerous extensions to opposing counsel to respond to written discovery. These numerous extensions were causing files to last for months with no activity (other than counsel billing for those activities associated with granting the extension). During my review, I made note of such patterns and then developed ways of addressing them through new procedures and processes. In addition, I also considered what I discovered in these evaluations and my solutions for addressing these issues in my benchmarking and goal-setting.

In the next and final part of this series, I will explore the nuts and bolts of the procedures, processes and guidelines that can be used when moving forward with a revamp of your litigation management system.

Time to Get Creative – Reducing Claim Costs without Sacrificing Quality (or your sanity)

Posted on by
Reply

Bright ideas will help reduce legal costs while still getting great service

Even as the country continues its difficult economic recovery, Moody’s recently concluded that P&C personal lines insurers remain financially sound. While such a report is good news, Moody’s also noted that challenges such as rising claim severity trends and significant property catastrophe risk remain. All this leads to an increased pressure to reduce costs and close claims.

The reality that claim and litigation departments are cost centers as opposed to income generators increases these pressures. Claim and litigation departments are also asked to do more with less resources and are under increasing pressure to close claims and litigated files faster than ever, while still maintaining claim handling and litigation management best practices. With all these challenges, how do claims professionals succeed? They get creative.

What You Know and More Importantly, What You Don’t Know

Before you can make changes and employ new processes, you have to know what you know and what you don’t know.  Obtain as much information as you can regarding the following:

  • Number of current litigated and non-litigated claims, broken down by type and severity
  • Average length of pending litigated and non-litigated claims
  • Average cost per closed litigated and non-litigated claim file
  • Average number of days necessary to close litigated and non-litigated claims
  • Average amount paid (indemnity) per closed litigated and non-litigated claim

These are just the basics.  If you have more information available, get it.If you don’t have this information, you have gained some valuable knowledge as well, namely, that you will need to develop or implement ways of tracking such information as part of your plan.

Who Is Doing the Work?

Next, you have to evaluate the strengths and weaknesses of your claim handlers, claim managers, outside counsel, and any other vendors you employ to handle claims and litigation.  If you haven’t formally evaluated these folks in a while, now would be a good time to do so.

Find out what they do, how they do it, and ask them for feedback regarding how they think that they can do their jobs better.  One of the biggest problems I’ve seen are companies that get in the way of their employees being successful often through employing processes and procedures that look good on paper, but don’t make sense in practice.  The only way to know if this is occurring in your organization is to spend some quality time with the people who are doing the work.

And don’t leave out the lawyers!  Although some may believe that panel counsel are only interested in billing you as much as they can, the good ones are also in an excellent position to know if your litigation procedures are costing the carrier money.  They can also provide procedural and process changes that may result in moving litigation to conclusion more quickly.

Know Thy Carrier

While all carriers want to decrease costs, decrease claims, and decrease litigation,  there are different philosophies as to how to accomplish these goals.  Some carriers may want to avoid litigation at all costs because they don’t want to pay legal fees and thus, they may be willing to pay more on questionable claims in order to avoid litigation.  Some carriers may want to take a hard-line approach with all claims and litigation (i.e. if they can’t prove it, we’re not paying it).  Some carriers take a more practical, business approach and want to do a cost-benefit analysis regarding the payment of claims and litigation.

You must know your carrier’s philosophy before you can make changes that count.  Moreover, the philosophy you choose is the one that is going to be the face of your claim and litigation department for the world to see, so make sure it’s the face you want to display consistently.  Companies that do not have, or do not know, what their claim and litigation philosophy is will not be successful at consistently reducing costs and closing claims and litigation.

In order to develop your philosophy, you will need to work with the balance of senior management and other relevant stakeholders to discuss the options and arrive at a conclusion that everyone is comfortable with promoting throughout the organization. Depending upon the size of your carrier, the number of people involved, and the difficulty you have obtaining information, going through steps one through three may take approximately two to six months.  However, once you complete these steps, you will be armed with everything you need to sit down and draft your new claim and litigation management plan.

Check back in December for part two of my blog that will discuss initial steps in your new claim and litigation management plan and provide an example of a plan that was successful for me.