5 Fatal Flaws in Litigation Management: Why Immediate Change is Crucial

With over 25 years of experience in the insurance industry, I’ve had the unique opportunity to see both sides of the litigation management equation—first as a defense attorney representing carriers, and later as a claims professional hiring counsel to protect insureds. Despite decades of advancements in technology and claims practices, one critical aspect has stubbornly remained unchanged: the strained dynamic between insurers and their legal counsel. The pervasive “us versus them” mentality continues to undermine collaboration, inflate costs, and prolong claim resolutions. Instead of fostering a true partnership, the focus has often shifted to controlling defense costs, leading to rigid oversight rather than meaningful teamwork. Yet, I firmly believe this doesn’t have to be the case. True collaboration—where counsel and claims professionals align around shared outcomes—isn’t just a lofty goal; it’s a necessity. The question is, are we ready to move beyond surface-level cooperation and embrace a partnership that truly delivers value?

Over the next few articles, I will delve into the persistent challenges plaguing litigation management and introduce practical solutions to bridge the gap. While these insights may seem straightforward, the fact that these issues persist underscores their complexity. This article serves as the starting point, outlining the problems.

I will be exploring solutions to this problem and present the Decision+™ approach—a framework designed to accelerate decisions and reduce payouts, which fosters genuine collaboration, leverages innovative strategies, and embraces technology to transform litigation. Together, we can break free from outdated practices and create a more efficient, collaborative future. Stay tuned for the solutions ahead.

Problem 1 – The Carrier-Counsel Divide

A key issue in litigation management is the lack of alignment between carriers and counsel. Many industry guidelines emphasize the importance of adjusters maintaining control of claims during litigation:

“Adjusters should proactively handle the claim in litigation and not abandon the claim to defense counsel just because the claim is in litigation.”

Despite these guidelines, adjusters often relinquish control once litigation begins, treating attorneys more as external agents than as integral members of the claims team. This hands-off approach results in a leadership vacuum, leaving attorneys to manage cases without the benefit of a cohesive claims perspective or strategic guidance. The outcome is a reactive process with limited opportunities for meaningful collaboration, hindering both efficiency and effective resolution.

Left to navigate cases independently, attorneys often make decisions that are technically sound but disconnected from the carrier’s broader objectives. The lack of alignment can lead to:

  • A focus on litigation tactics over settlement strategies increases filings, prolonging cases and driving up costs.
  • Overuse of depositions and document requests without clear plans inflates expenses.
  • Without guidance, attorneys may prioritize billable hours over efficient resolutions, conflicting with cost-containment goals.

The carrier-counsel divide highlights a critical need for stronger integration and alignment. Without a unified approach, inefficiencies persist, and opportunities for timely and effective case resolution are missed. Building a true partnership based on shared goals and open communication is essential to overcoming these challenges and ensuring better outcomes for all stakeholders, especially the insured.

Problem 2 – Costs and Outcomes

The disconnect between carriers and counsel has significant financial and operational consequences, driving inefficiencies that disrupt the claims process. Ineffective collaboration exacerbates three critical issues:

  • Delayed Resolutions: Without streamlined decision-making, claims linger in litigation for extended periods, escalating frustration and costs.
  • Escalating Costs: Poor coordination often results in prolonged lawsuits that inflate expenses without delivering meaningful value.
  • Erosion of Trust: Lengthy litigation leaves policyholders feeling overlooked, undermining trust and damaging the carrier’s reputation.

Efforts to address these challenges through communication mandates and litigation plans have had limited impact, largely due to the entrenched adversarial mindset between carriers and counsel. The ongoing emphasis on cost control rather than collaboration continues to perpetuate inefficiencies and dissatisfaction for both sides.

Problem 3 – Culture and Billing

At the core of the carrier-counsel division lies a systemic issue: the culture of litigation management within the insurance industry. The dominant focus on cost containment often overshadows the need for collaborative, outcome-driven relationships. Industry guidelines frequently emphasize the importance of aligning legal strategy with claims objectives:

“Attorneys must align with the overall claim strategy and obtain adjuster approval for significant decisions such as filing motions, hiring experts, or pursuing depositions.”

However, in pursuit of cost control, the industry has swung to extremes, implementing stringent billing guidelines and complex coding requirements. While these measures aim to rein in expenses, they often have unintended and counterproductive consequences:

  • Administrative Overload: Attorneys spend an increasing amount of time ensuring bills meet approval standards rather than focusing on meaningful casework. This adds layers of bureaucracy, detracting from substantive progress on cases.
  • Micro-Management of Tasks: Carriers frequently require pre-approval for even routine tasks as a cost-control measure. Instead of fostering open dialogue about case strategies, these conversations often occur indirectly through billing systems, reducing opportunities for collaboration.
  • Frustration and Distrust: Restrictive guidelines leave counsel feeling stymied and claims perceiving attorneys as billing-focused, eroding trust and hindering teamwork. Attorneys may feel undervalued or constrained, leading to a transactional relationship where both parties operate defensively. This dynamic discourages proactive problem-solving and reinforces a mindset of minimal compliance rather than genuine partnership.

The cultural divide stems from viewing attorneys as cost centers rather than strategic partners, limiting their ability to craft solutions and drive effective resolutions. This compliance-focused relationship stifles innovation and collaboration, leaving carriers with higher costs and delays, and attorneys constrained by rigid controls. Breaking this cycle requires shifting from cost-control to a value-driven approach.

Long-standing issues—misalignment, cultural divides, and inefficiencies—have persisted throughout my three decades in the industry. Change is a necessity.

Problem 4 – Misaligned Priorities and Increased Documentation Demands

A critical issue in litigation management arises from a lack of understanding between claims professionals and legal counsel regarding their distinct roles, responsibilities, and external pressures. While both aim to achieve favorable outcomes for the insured and the carrier, their differing methods, priorities, and incentives often clash, undermining collaboration and amplifying inefficiencies.

Legal counsel, incentivized by billable hours, dedicate significant time to documenting their work—efforts that may not always align with the carrier’s broader goals. Meanwhile, claims professionals focus on efficiency, striving to resolve cases swiftly and cost-effectively while also managing mounting scrutiny from internal auditors, regulators, and compliance teams. This dual burden of efficiency and oversight has increased demands for meticulous documentation at every step, creating friction between the two groups.

The disconnect manifests in several ways:

  • Documentation Overload: Attorneys feel encumbered by frequent requests for detailed reports, while adjusters grapple with the pressure to justify their decisions to superiors, auditors, and regulators, often in real time.
  • Strategic Misalignment: Attorneys, concentrating on legal nuances and litigation risks, may lose sight of broader claims strategies. Conversely, adjusters, preoccupied with timelines and audit compliance, may overlook critical legal considerations.

The lack of alignment between claims professionals and legal counsel creates a cycle of inefficiency, with each side constrained by competing demands and priorities. This misalignment not only hampers collaboration but also detracts from achieving timely, effective outcomes for all stakeholders. Bridging this gap requires a shared understanding of roles and a commitment to aligning strategies with overarching goals.

Problem 5 – The Impact of COVID-19 on Staffing and Collaboration

The COVID-19 pandemic further intensified these challenges by introducing new pressures on both claims departments and legal counsel. Remote work, staff shortages, and increased caseloads have forced both sides to “do more with less,” often under strained circumstances. The demands for enhanced documentation and compliance have only grown in this environment.

For claims professionals, staffing reductions and remote operations have disrupted workflows, resulting in delays in decision-making and reduced capacity for active oversight of litigation. Attorneys, meanwhile, have faced similar staffing challenges, coupled with court backlogs, increases in nuclear verdicts and procedural changes that demand additional effort to navigate. The combined effect has heightened existing tensions, as both parties feel overburdened and under-supported.

Key impacts of the post-COVID environment include:

  • Increased Scrutiny: Carriers face higher demands from regulators and auditors, requiring extensive documentation and justification for claims handling and litigation decisions.
  • Reduced Collaboration: Remote work and virtual communication tools have made it harder for claims professionals and attorneys to engage in the face-to-face discussions necessary for building trust and aligning strategies.
  • Burnout and Attrition: Both claims and legal teams are experiencing high turnover rates, leading to a loss of institutional knowledge and continuity, further complicating the alignment of goals and strategies.

As noted, the COVID-19 pandemic has intensified challenges in litigation management, with remote work, staffing shortages, and increased caseloads disrupting workflows and straining resources. These pressures highlight the urgent need for a more adaptable, collaborative approach. Prioritizing clear communication and shared strategies is essential to building a resilient framework for effective litigation management.

Looking Ahead

The problems outlined in this article underscore the urgent need for a fundamental transformation in litigation management. These long-standing issues—misalignment, cultural divides, and inefficiencies—have persisted throughout my three decades in the industry, now intensified by post-COVID pressures. While these challenges are significant, they are not insurmountable. Addressing them requires a deliberate shift in mindset, where carriers and counsel move beyond entrenched adversarial dynamics to foster trust, mutual respect, and alignment around shared goals.

At its core, this transformation is about reframing the carrier-counsel relationship as a partnership, one where both parties are aligned around a common purpose: achieving fair, efficient, and value-driven claim resolutions. It is only through collaboration and open communication that the full potential of this partnership can be realized, benefiting insureds, carriers, and counsel alike.

Future articles will explore actionable solutions, innovative strategies, and frameworks like my Decision+™ approach. Together, we can break free from outdated practices and transform litigation management into a strategic advantage. Stay tuned for the next steps toward meaningful change.

Thinking About 2025: Driving Innovation in Insurance Claims Technology

The U.S. insurance industry continues to exhibit its remarkable resilience, as underscored by its impressive financial turnaround in recent years. However, sustaining this momentum and preparing for future challenges demand more than just traditional strategies. As highlighted by the exceptional leaders featured in Insurance Business America’s Hot 100 2025, the road ahead involves fostering technological innovation in claims processing and ensuring the right expertise is on board to drive these initiatives.

The Call for Claims Technology Innovation

The modern insurance landscape necessitates a profound shift in how claims are managed. From the First Notice of Loss (FNOL) process to complex litigation management, the integration of advanced claims technology has proven to enhance efficiency, reduce costs, and improve customer satisfaction.

For example, AI-driven tools like predictive analytics and natural language processing are now being used to:

  • Identify high-risk claims early: This enables insurers to allocate resources effectively, mitigating costs and risks associated with prolonged claims.
  • Enhance fraud detection: Machine learning models can analyze patterns in data to detect anomalies that may indicate fraudulent activity.
  • Automate routine processes: By automating document reviews and data entry, insurers can free up human resources for more strategic tasks.

These advancements align with the pressing need for seamless systems integration. As noted in the industry, the “tech tango”—the harmony of old and new systems—enables companies to maximize the benefits of their investments without disrupting ongoing operations.

Hiring the Right Consultants for Success

Innovation in claims technology is a complex journey that involves navigating challenges such as system integration, stakeholder buy-in, and operational disruptions. This is where the role of specialized consultants becomes invaluable. It is critically important to recognize the gaps and seek complementary expertise to bridge them effectively.

Hiring the right consultants can ensure:

  • Objective assessments: Independent experts provide unbiased evaluations of existing systems and processes.
  • Tailored strategies: Consultants bring a wealth of experience across different industries, enabling the customization of solutions that align with an organization’s unique needs.
  • Streamlined implementation: With dedicated project management expertise, consultants help mitigate scope creep and ensure timely execution of technological initiatives.

Furthermore, consultants facilitate cultural change within organizations by aligning technology goals with broader business strategies. They act as catalysts for innovation, ensuring that both technological tools and the people using them are set up for success.

Balancing Technology with Human Expertise

The future of claims innovation lies in striking the perfect balance between automation and human oversight. As seen with solutions like  AI-driven FNOL process, technology can handle simple claims efficiently, but complex cases still require human judgment and empathy.

Investing in robust training programs ensures that staff can harness the full potential of new technologies. It’s equally critical to maintain transparency in AI-driven decisions, fostering trust among both employees and customers.

Charting the Path Forward

As the U.S. insurance market is poised to reach $4.50 trillion by 2029, the stakes for staying competitive are higher than ever. Embracing claims technology innovation and enlisting the right experts to guide this transformation are no longer optional—they are essential strategies for thriving in a rapidly evolving industry.

The journey to modernization requires bold leadership, strategic investments, and a commitment to enhancing both technological capabilities and human expertise. By addressing these areas, insurers can transform claims management from a cost center into a driver of customer satisfaction and operational excellence.

What steps is your organization taking to innovate in claims technology? Share your insights and experiences in the comments below!

Improving Litigation Management: A Data-Driven Approach

Addressing the Challenges of Accurate Data

The integration of data analytics and predictive modeling into litigation management can revolutionize how insurers handle claims, especially considering some of the new technologies hitting the market.  For years the focus has been on billing data to help manage counsel and litigation. This type of information provided some insight into counsel performance and compliance with billing guidelines but did not really translate to better litigation management. I would argue that some of this taken the effectiveness of litigation in the wrong direction but that is an article for another day. 

The success of this data-driven approach relies heavily on the quality and consistency of the data itself. For many claims departments, the hurdles of poor data input, unstructured information, and inconsistent data formats remain significant challenges. In addition, busy adjusters are being asked to spend more and more time inputting data which is taking away from their primary function as claim professionals. Addressing these issues is essential to unlocking the full potential of analytics in reducing litigation costs and improving outcomes.

Challenges in Achieving Accurate Litigation Data

1. Inconsistent or Incomplete Data Input by Claims Professionals

Claims professionals often prioritize immediate claim resolution over data entry, which can lead to missing, incomplete, or inaccurate information. Key details about litigation—such as court timelines, case strategy, or witness information—may be overlooked during input, reducing the reliability of downstream analytics.

2. Unstructured Data in Litigation Reports and Court Documents

Much of the critical information for managing claims litigation resides in unstructured formats, such as adjuster notes, attorney reports, and scanned court documents. Extracting insights from this data requires significant manual effort or sophisticated technology, which can slow down processes or introduce errors.

3. Data Inconsistency Across Systems

Data from different sources—claims systems, legal databases, and external platforms—often lacks standardization. Disparate formats, conflicting terminology, and varying levels of detail make it difficult to integrate and analyze data effectively.

Strategies for Overcoming Data Challenges

1. Improving Data Input Quality

  • Simplify Data Entry Interfaces: Design claims systems with intuitive, user-friendly interfaces that guide adjusters to input essential information without overwhelming them.
  • Incentivize Accurate Data Collection: Recognize and reward claims professionals for thorough and accurate data entry as part of their performance metrics.
  • Automate Data Entry: Leverage technologies such as natural language processing (NLP) and AI to extract relevant information from adjuster notes and reports, reducing manual workload and errors.

2. Structured Data Extraction from Unstructured Sources

  • Implement Text Mining Tools: Deploy NLP and machine learning algorithms to scan unstructured data sources, such as litigation reports and court documents, for relevant information. These tools can identify key data points like settlement ranges, precedent cases, and critical deadlines.
  • Centralized Data Repositories: Consolidate unstructured and structured data into a centralized system, allowing claims teams to access and cross-reference information more effectively.
  • Invest in Document Digitization: Use optical character recognition (OCR) and AI-powered data extraction to digitize physical documents and integrate their contents into claims systems.

3. Standardizing and Validating Data Across Systems

  • Create a Unified Data Schema: Establish a standardized framework for entering and storing claims and litigation data to ensure consistency across all systems and teams.
  • Cross-System Integration: Use middleware or APIs to synchronize data from disparate systems, ensuring that all platforms are working with the same information.
  • Regular Data Audits: Conduct periodic reviews of data quality to identify and address inconsistencies, duplicate entries, or missing information.

Enhancing Litigation Management with Reliable Data

Once the challenges of data quality are addressed, the true potential of analytics in litigation management can be realized:

  • Early Identification of High-Risk Cases: With accurate data, predictive models can reliably flag cases likely to result in significant litigation costs, allowing early intervention.
  • Improved Resource Allocation: Better data consistency enables teams to allocate legal and claims resources more effectively, focusing efforts on high-priority cases.
  • Enhanced Outcome Prediction: Clean, standardized data improves the accuracy of predictive analytics, helping to forecast settlement ranges and litigation timelines.

Building a Culture of Data Excellence

To address these challenges, claims leaders must prioritize a cultural shift toward data excellence:

  • Training and Education: Provide regular training for claims professionals to emphasize the importance of accurate data entry and how it supports better litigation management.
  • Collaborative Tools: Use tools that facilitate collaboration between claims handlers, legal teams, and IT departments to ensure data flows smoothly across functions.
  • Continuous Improvement: Establish feedback loops to refine data entry processes and adjust technology solutions based on user experiences.

Conclusion: A Foundation for Data-Driven Success

Accurate and consistent data is the foundation of a successful data-driven approach to litigation management. By addressing the root challenges—poor data input, unstructured information, and inconsistency—claims departments can unlock the full potential of predictive analytics and streamline litigation processes. While technology plays a vital role, building a culture that values data accuracy and consistency will ultimately ensure sustained improvements in litigation management.

How does your organization ensure data quality in litigation management? Share your strategies in the comments below, and let’s explore solutions to elevate our industry together.

Streamlining the First Notice of Loss (FNOL) Process: Best Practices and Technologies

In the fast-paced world of insurance claims, the First Notice of Loss (FNOL) process is the critical first step that can make or break the entire claims experience. It’s the moment of truth where insurers have the opportunity to set the tone for the entire claims journey. Let’s dive into some best practices and cutting-edge technologies that can help streamline this crucial process, with a special focus on the game-changing potential of customer portals.

Understanding the Importance of FNOL

The FNOL process is more than just collecting information – it’s about establishing trust, providing reassurance, and setting expectations. A smooth, efficient FNOL process can lead to:

  1. Increased customer satisfaction
  2. Faster claims resolution
  3. Reduced operational costs
  4. Improved fraud detection

Ways to Streamline the FNOL

  1. Multi-Channel Reporting Options: Offer various channels for reporting claims, including phone, web, mobile apps, and even social media. The key is to meet customers where they are, providing convenience and accessibility.
  2. Simplify the Questionnaire: Keep the initial questions simple and relevant. Collect only the essential information needed to start the claims process. Additional details can be gathered later if necessary.
  3. Implement Intelligent Routing: Use automated systems to route claims to the appropriate departments or adjusters based on the type and severity of the claim.
  4. Provide Immediate Feedback: Give customers immediate confirmation that their claim has been received and provide next steps or expectations for follow-up.
  5. Train Staff Effectively: Ensure that all staff handling FNOL are well-trained, empathetic, and capable of providing a positive customer experience.

Leveraging Technology for FNOLThe Need for a Customer Portal for Reporting

A robust customer portal that serves as a one-stop-shop for FNOL and claim management and the implementation of one should be a top priority. Here’s why it’s a game-changer:

  • Ease of Reporting: Customers can report claims at their convenience, 24/7, without waiting on hold or scheduling calls.
  • Reduced Input Errors: By integrating the portal directly with your claims system, you can implement data validation rules and pre-fill known information, significantly reducing input errors.
  • Eliminates Redundancy: Once information is entered, it flows directly into the claims system, eliminating the need for rekeying data and reducing the risk of transcription errors.
  • Decreased Need for Clerical Staff: With customers inputting data directly and accurately, the need for clerical staff to manually enter FNOL information is greatly reduced, allowing for reallocation of resources to more complex tasks.
  • Real-Time Updates: Customers can track the progress of their claim in real-time, reducing follow-up calls and improving satisfaction.

Other Key Technologies to Improve FNOL Reporting

  1. Mobile Apps with Photo/Video Capabilities Develop user-friendly mobile apps that sync with the customer portal, allowing customers to submit photos or videos of damage, streamlining the information gathering process.
  2. Natural Language Processing (NLP) Utilize NLP technology to analyze written claim reports submitted through the portal, extracting key information automatically and reducing manual data entry.
  3. Predictive Analytics Implement predictive models to assess the potential severity and complexity of a claim at the FNOL stage, allowing for better resource allocation.

Case Study: InsurTech Success Story

Consider the case of Lemonade, a disruptor in the insurance industry. 98 % of all FNOL for Lemonade is being handled by their bot – AI Jim.  Lemonade has also reported a 25 percent productivity benefit achieved in three years’ time, and indemnity payouts reduced by 3-5 percent for day-to-day claims and up to 14 percent for large verdicts, as well as a 10 percent drop in legal spend.  (Lemonade Exec: AI Getting the Right Claims to the Right Adjuster)

Looking Ahead

The key to success in streamlining FNOL lies in balancing technology with the human touch. While automation and self-service portals can significantly improve efficiency, it’s crucial to maintain the option for human interaction, especially for complex claims or distressed customers.

By implementing these best practices and leveraging cutting-edge technologies, particularly robust customer portals, insurers can transform the FNOL process from a necessary administrative task into a powerful tool for customer satisfaction and operational efficiency. The reduction in input errors, elimination of redundancy, and decreased need for clerical staff not only cut costs but also pave the way for a more streamlined, accurate, and customer-friendly claims process.

What strategies has your organization implemented to streamline the FNOL process? Have you seen success with customer portals? Share your experiences in the comments below!

A Nice Refresher: The Critical Role of Timely and Accurate Practices in Claims Management 

I hate to state the obvious, but accurate, timely and consistent reserving is the one truth that remains constant in the ever-evolving world of insurance. As a recent industry analysis pointed out, “This gap ultimately impacts claims and reserves, as carriers with outstanding cases will have to ensure they have adequate reserves to handle payouts when the cases do eventually resolve.” This statement underscores a critical aspect of claims management that deserves our full attention. This concept is so important it deserves repeating again and again.  

While many reading this blog know the importance it’s worth a refresher especially for those new to the industry. Let’s dive into why consistent reserving and informative trend analysis are not just good practices, but essential strategies for navigating the choppy waters of modern insurance.

The Ripple Effect of Reserving

Think of reserves as the financial shock absorbers of the insurance world. When set correctly, they help cushion the impact of claim payouts, ensuring the stability and solvency of insurance companies. But when reserves are inadequate or inaccurate, the consequences can ripple through the entire organization, affecting everything from financial reporting to pricing strategies.

Consistency: The Golden Rule of Reserving

Consistent reserving practices are the cornerstone of effective claims management. By establishing and adhering to clear guidelines for setting reserves, insurers can:

  • Enhance transparency for stakeholders
  • Facilitate more effective comparison of performance over time
  • Improve accuracy in financial forecasting
  • Provide a solid foundation for identifying emerging trends

But consistency doesn’t mean rigidity. The key is to have a systematic approach that can adapt to changing circumstances while maintaining its core principles.

Trend Analysis: Your Crystal Ball

While consistent reserving provides the foundation, trend analysis is your crystal ball, offering insights into the future of claims patterns. By regularly analyzing reserve change trends, insurers can:

  • Identify potential problems with reserving practices early on
  • Distinguish between reserving issues and genuine increases in exposure
  • Anticipate and prepare for emerging risks
  • Make data-driven decisions about policy pricing and risk management strategies

The Power of Early Detection

One of the most valuable aspects of robust trend analysis is the ability to detect issues early. By monitoring reserve change trends, insurers can quickly identify whether increases are due to:

  • Inadequate initial reserves (a reserving problem)
  • Unexpected claim development (a potential new trend in exposure)
  • External factors like social inflation or legal environment changes

Early detection allows for prompt corrective action, whether that means adjusting reserving practices, re-evaluating risk assessment protocols, or developing new strategies to address emerging exposures.

Putting It into Practice

So, how can claims departments implement these principles effectively? Here are a few key strategies:

  • Establish clear, written guidelines for setting and adjusting reserves
  • Regularly review and update these guidelines to ensure they reflect current realities
  • Implement a robust data analytics program to track and analyze reserve trends
  • Conduct frequent (at least semi-annual) reviews of reserve adequacy and trends
  • Foster collaboration between claims, underwriting, and actuarial teams to ensure a holistic view of risk and reserving
  • Invest in training to ensure all relevant staff understand the importance of accurate reserving and can interpret trend data

The Road Ahead

In an industry facing challenges from social inflation, court backlogs, and evolving risk landscapes, the importance of timely and accurate reserve practices cannot be overstated. By focusing on consistency in reserving and leveraging the power of trend analysis, insurers can navigate these challenges more effectively, ensuring they’re prepared for whatever lies ahead.

Remember, in the world of insurance, forewarned is forearmed. The insights gained from robust reserving practices and trend analysis are not just numbers on a spreadsheet – they’re the compass that guides strategic decision-making and ultimately, the long-term success of the organization.

What strategies does your organization use to ensure timely and accurate reserving? How do you leverage trend analysis to stay ahead of emerging risks? Share your thoughts and experiences in the comments below – let’s learn from each other and continue to elevate our industry practices.

Taming the Claims Severity Beast: A Data-Driven Approach to Litigation Management

In today’s landscape of escalating lawsuit costs and economic uncertainty, managing litigation severity has become a critical challenge for claims departments (see Social Inflation is up). The question is: how can we effectively address this issue without compromising efficiency or breaking the bank? Let’s explore a data-driven, technology-powered approach to litigation management that can help tame the claims severity beast.

Understanding Claims Severity

Claims severity is more complex than just the dollar amount of a settlement. It encompasses financial costs, time invested, and even emotional toll. Influenced by factors ranging from company procedures to unexpected events, understanding severity is crucial for developing effective litigation management strategies.

A striking real-world example of claims severity comes from the trucking industry. According to a 2020 study by the American Transportation Research Institute (ATRI), the average cost of a crash involving a large truck increased from $120,000 in 2009 to $182,000 in 2019 – a staggering 52% increase. Even more alarming, crashes with injuries saw costs rise from $195,000 to $428,000, a whopping 120% increase. (Understanding the Impact of Nuclear Verdicts on the Trucking Industry.” June 2020)

This example illustrates how factors like rising medical costs and increased legal fees can dramatically impact claims severity over time. It’s not just about the initial incident anymore – the long-term implications and escalating costs play a significant role in the overall severity of a claim.

Leveraging Data as a Strategic Asset

In the battle against claims severity, data is your most powerful asset. Historical cases, claims records, and legal documents form a rich repository of information. With proper analysis, this data can reveal patterns, predict high-risk claims, and even prevent problematic cases before they escalate. It’s about transforming raw information into actionable insights.

A striking example of leveraging data and AI in claims management comes from Lemonade, a disruptor in the insurance industry. Lemonade uses AI extensively in claims processing, employing a combination of machine learning, chatbots, and computer vision. Their AI system, aptly named “AI Jim,” handles the entire claims process for simple cases, from initial report to payment. The results are nothing short of remarkable: 30% of claims are settled instantly, with the record for the fastest claim processed standing at an astonishing 3 seconds. Perhaps most impressively, Lemonade has managed to reduce its claims expense ratio to just 2%, significantly outperforming the industry average of 10-15%. This case demonstrates the transformative potential of AI in claims management, showing how it can dramatically improve efficiency, speed, and cost-effectiveness. https://www.linkedin.com/pulse/ai-insurance-streamlining-underwriting-claims-andre-ripla-pgcert-4qdye

Another powerful example of leveraging data and technology comes from Zurich Insurance. They implemented an AI-powered system to handle property and injury claims, utilizing machine learning and natural language processing. This advanced system reviews medical reports and assesses the severity of injuries to determine appropriate compensation. The results were impressive: claims processing time was reduced by 50%, consistency in claims decisions improved by 25%, and they saw a significant reduction in operational costs. This case clearly demonstrates how AI and data analytics can dramatically improve claims management efficiency while also ensuring more consistent and fair outcomes for claimants. https://www.linkedin.com/pulse/ai-insurance-streamlining-underwriting-claims-andre-ripla-pgcert-4qdye/

These examples demonstrate the power of leveraging data to not only improve efficiency but also to proactively manage and reduce claims severity.

Embracing Technological Tools

Artificial Intelligence and machine learning are no longer just buzzwords; they’re essential tools in modern litigation management. These technologies can process vast amounts of data, identify hidden patterns, and predict outcomes with increasing accuracy. 

Automation tools also play a crucial role, handling routine tasks and freeing up your team to focus on strategy. Effective communication tools ensure that all stakeholders remain informed and aligned throughout the litigation process.

Implementing Best Practices

Deploying new tools and strategies requires a thoughtful approach. Consider these best practices:

1. Foster collaboration between all stakeholders, from insurers to legal teams to front-line claims assessors.

2. Establish clear objectives and Key Performance Indicators (KPIs) to measure strategy effectiveness.

3. Maintain accurate data – the adage of garbage in garbage out is never truer than with litigation data. Make the time and investment and get it right.

4. Use technology to enhance, not replace, human judgment and decision-making.

5. Invest in continuous training to ensure your team can effectively utilize new tools and strategies.

The Importance of Action

Managing claims severity isn’t solely about cost reduction; it’s about creating a more efficient, effective claims process that benefits all parties involved. By leveraging data, embracing technology, and implementing proven strategies, we can significantly improve litigation management outcomes.

The tools and strategies are available, and the potential benefits are substantial. It’s time for claims leaders to take action and implement these approaches to effectively manage claims severity.

What strategies have you employed to address claims severity in your organization? Share your experiences in the comments below – let’s continue to learn from each other and advance our industry practices.

Social Inflation has Commercial Casualty Losses up 11% Over the Last 5 Years: 3 Claims Department Strategies That Will Help You Navigate The Problem

Swiss Re’s latest report on social inflation is a must-read for claims professionals. Their sigma No 4/2024 study, “Litigation costs drive claims inflation: indexing liability loss trends,” offers a comprehensive look at this growing challenge. The findings are sobering: the U.S. liability risk pool is expanding rapidly, with commercial casualty insurance sector losses growing at an average annual rate of 11% over the last five years. Importantly, this isn’t just a U.S. phenomenon anymore. The UK, Australia, and Canada are also experiencing similar trends, albeit to a lesser degree. As claims leaders, it’s crucial we understand and adapt to this changing landscape. With that in mind, let’s explore three essential strategies that can help your claims department navigate the complexities of social inflation.

1. Embrace Your Inner Data Nerd

In today’s claims environment, data should be at the forefront of your decision-making process. Modern claims departments need to utilize their data effectively, not just for reporting, but for predicting future trends. Predictive analytics can help you identify potential high severity claims before they escalate. 

By analyzing historical data, court rulings, and social trends, you can spot patterns that may indicate where social inflation is likely to impact your claims. This foresight allows you to proactively adjust your strategies, whether in reserving, settlement approaches, or litigation decisions.

If you’re not using your claims data to anticipate future challenges, you’re missing a crucial tool in managing social inflation. The ability to predict which claims are likely to result in larger-than-expected payouts can be a game-changer for your department.

Predictive does not always mean some hi-tech analytics model. Predictive can also be developing, using and analyzing the correct trends within your existing data. 

2. Early Case Assessment: Your New Best Friend

In the age of social inflation, early case assessment has become more critical than ever. The sooner you can identify high-risk claims, the better positioned you’ll be to make informed decisions about how to handle them.

Your early case assessment process should be comprehensive and efficient. It should help you quickly identify claims that have the potential to result in large verdicts or settlements. This might include cases in jurisdictions known for high awards, claims involving severe injuries, or those that touch on hot-button social issues.

By identifying these high-risk claims early, you can develop appropriate strategies – whether that means early settlement negotiations, allocating additional resources for defense, or preparing for potential litigation. Early case assessment is your first line of defense against the impacts of social inflation.

3. Invest in Advanced Technology

If your claims department isn’t leveraging advanced technology, you’re at a significant disadvantage in today’s environment. Advanced data analytics tools and AI can process vast amounts of claims data quickly and accurately, identifying patterns and predicting outcomes that might not be apparent to human analysts.

These technologies can help you process claims more efficiently, spot potential fraud, and assist claims professionals in making more accurate reserve estimates. They can also assist in identifying trends in jury awards and settlement amounts, helping you stay ahead of the curve in your claims handling strategies.

However, it’s not enough to simply have these technologies – you need to use the insights they provide to inform your strategies. Use this data to adjust your reserves, refine your pricing models, and guide your overall claims handling approach.

Adapting to the New Normal

Social inflation is reshaping the claims landscape, and it’s clear that this trend isn’t going away anytime soon. By embracing data analytics, prioritizing early case assessment, and leveraging advanced technology, your claims department will be better equipped to navigate these challenges.

Remember, the goal isn’t just to react to social inflation, but to anticipate and mitigate its effects. With these strategies in place, you’ll be well-positioned to manage claims effectively in this new environment.

What strategies is your claims department using to address social inflation? Share your thoughts in the comments below – let’s learn from each other and develop best practices for this ongoing challenge.

3 Claims Department Musts That Will Let The CEO Sleep Soundly

Fotolia_43932868_XSLet’s face it, running an insurance company is no easy task.  Market pressures, changing cycles, balancing the right mix of products and ensuring an efficient operation will certainly keep a CEO up at night. Having a smoothly run claims department is essential to ensure costs are maintained and customers continue to return. No one likes claims, however they are the largest expense an insurance company will have and as such it is essential that they run efficiently.

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There are many elements to a well run claims department. As with many areas of business it comes down to people, process and technology. Good people will drive the success of any department and working with defined efficient processes, as well as technology tools that support the organization, are basic core requirements to any well run department.

3 “Must Haves”

Specifically what people, processes and technology make up a good claims department is a subject for another day. Regardless every claims department should be using metrics, performing audits and have a business continuity plan in place as a minimum.

Metrics – Today’s claims department should be filled to the brim with claims data. If your claim system doesn’t provide robust data then there are bigger issues to deal with. Data from the claims department should be actively used to address different needs from various internal stakeholders. Claims managers should have information about the efficient handling and disposition of claims. Underwriters should have information about client activity and trends. And actuaries should be able to develop claims data to ensure reserve are adequate and pricing is appropriate. Dashboards of claims information should be available to the CEO to help identify trends and allow for  both a tactical and strategic view of the operations.

If you are not getting or using your claims data to provide valuable metrics then sleep is the least of your worries.

Auditing – File reviews are an essential tool for claims departments and should be part of the overall culture of the organization. Performing regular internal claim audits helps ensure that reserve practices remain consistent and appropriate and the operation is running efficiently.  More specific audits can help target various operational issues to ensure quality and compliance and can include data audits, financial audits and customer service reviews.  Auditing should be a regular part of the business landscape and be conducted in a formal way and on a regular basis (see my article A Claims Tale Of Three Little Managers And Their Review Programs).

If your’e a CEO and you don’t need sleep, then don’t worry if your claims department is auditing. However, if you like to rest easy – this one should be a no-brain solution. Make sure there is an audit plan and program in place and it is running regularly.

Business Continuity – Are you really ready for the next disruptive event that could derail the operation? The main question for your claims department is can they manage, restore and recover essential functions, processes and data during and after disruptions to operations? If there answer is – I don’t know – then you probably aren’t sleeping at night.

The claims department should develop an incident-agnostic functional recovery program that can establish a predictable recovery priority that maintains a “going concern” and can ensure that the claims “supply chain” continues to operate. Like the rest of the organization, there needs to be a proper Business Continuity Plan in place to ensure the company is ready to handle any disruption.

Ensuring a smooth running claims department is vital to a successful running organization. Even well run companies should take a look to make sure that three “must haves” are in place so the CEO can sleep better at night.

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What else is keeping you up at night?

 

4 Keys to Managing a Successful Outsourced Claims Operation

GettyImages_174670671To be Successful One Must Have Strong Oversight and Controls From the Beginning

So you have decided to hire a Third Party Administrator to handle your claims and it seems like a reasonable decision at the time. You either have some new specialized business you are writing and don’t have the expertise in-house, or you don’t want to set up a new regional claim office or you are a new company and want to have an experienced claim department in place. Yes – the TPA is the answer to all your concerns.

All things being equal there are many fine TPAs in the market that will provide wonderful service to your insureds in a cost effective and comprehensive manner. Initially you think you have chosen a good one. However, as time goes on you realize you are not exactly getting what you expected from your TPA. So what happened?

It matters little what your reasons for outsourcing were. Bottom line is if you didn’t take certain steps to properly select and manage a TPA you are likely to end up with problems. The partnership you form with your TPA will be fruitful if you take these key steps to select and manage them in a way designed to foster long term success.

  1. TPA Selection – Do your due diligence.  If you are handling claims over to a Third Party Administrator remember they will be the face of your company to your customers. Take their selection seriously. Form a multidisciplinary selection team and engage IT, Finance and Operations in the selection process. Besides the basic questions, look at their staffing and turnover rates. Ask to speak to references and understand how they manage their accounts internally.  Do they have dedicated claim units? How strong is their technology? How flexible are they in producing reports? When was the last time they had an independent audit? There are many more questions to be asked but this is not the time to be shy. Dig deep and understand who they are and what they can do.
  2. Oversight – General Guidelines. Don’t rely on the TPA’s claims guidelines. You should develop, and expect the TPA to adhere to, a very specific set of best practices to suit your company’s requirements. Tell the TPA what you expect and hold them to it. When drafting guidelines pay attention to sections involving the retention of counsel, vendors and experts. Make sure they seek approval where appropriate and drive the selection to vendors that have been vetted by you or better make them use your own panel.  Be specific about what claims you want to know about and when. Make sure you review these guidelines regularly and adjust them where appropriate. Remind the TPA will be using these guidelines to measure their compliance.
  3. Strong Internal Formal Claims Program.  Just because you have outsourced your claims management to a TPA does not mean you do not need to maintain a strong internal claims program. The successfully managed programs work with a combination of oversight and strong in-house claims account managers watching the TPA’s activities.  It is important that internal claims staff be well versed in the expected handling practices and the ability to spot issues before they become problems. Internal claims professionals should have skills similar to a department manager that can handle trend analysis as well as being able to have difficult performance discussions with the TPA.  No successful program works without skilled in-house claims resources.
  4.  Audit – Review and Re-review. Unless you are reviewing the TPA’s work for compliance through regular claim audits you are setting your program up to fail. Reacting to individual claim issues will not create a balanced efficient program and will cause the TPA to react to whatever the issue of the month is.  Regular audits identify problems and force solutions to be addressed by the TPA. Some of the best run programs audit their TPA’s 3-4 times per year.  In addition to regular best practice compliance reviews conducting specific targeted reviews can strengthen a program’s effectiveness (i.e. reserve review, vendor management  or financial controls).

Working with TPAs can be a very rewarding and cost effective method for handling claims. Many are experts at what they do and have well run efficient operations. Regardless, the old adage about the squeaky wheel getting the grease is never truer than in the oversight of a TPA.  Get squeaky!

What are other things needed when selecting and managing a TPA?

Kindergarten Management: Getting Back to the Basics

GettyImages_165879441Guess What – Good Management And Organizations Are Like a Smoothly Run Kindergarten

Everything we know in life started back in kindergarten.  Kindergarten is where we learned to socialize in groups, lived by rules, played well with others, managed time, took turns asking questions and listened to authority. Success and creativity were rewarded and failures became further learning experiences.  The more I thought about this recently the more I realized that kindergarten is a perfect example of a well-functioning organization and management.

We can lean a lot by going back to kindergarten. Bear with me and let’s take a look how this would apply in a claims department.

Relating to others

As in kindergarten, managing claim files effectively requires the ability to socialize well with others both inside and outside the organization. The good claim professional knows how to get along with his or her peers and relates well to claimants who are facing some kind painful loss. In addition, to be a successful claims professional it is important to be able to work well in teams and share and learn from the group. All quintessential lessons learned in kindergarten.

Time management

Time management is a key element in handling claims. Like kindergarten, everything needs to be done at a specific time. With large caseloads and ever increasing demands, the effective claims professional manages their time very well using diary reminders and focusing on the tasks at hand. A well-structured day allows the claims professional to address file demands in a consistent and timely manner.

Controlled creative thinking

Kindergarten encourages a controlled environment with guidelines that still allows for the expression of creativity. Think finger painting. Finger painting allowed one to be wildly creative but still had to be done on the specific paper, in a specific area under certain rules.  Best practices are frameworks that good claims handlers follow to ensure they are managing files in a timely and fair manner.  Regardless of the claims guidelines or best practices however,  creativity in thinking and managing files is essential in achieving some of the best results.  Out of the box approaches to challenging claims issues are welcome and these creative approaches make for very successful operations (see Improve bottom-line outcomes on claims by thinking outside-the-box!).

Rewarding success and learning from mistakes

Kindergarten is about establishing the framework for children to succeed in primary school and ultimately in life. Successes are actively and openly rewarded and shared with the group. Conversely, failures and mistakes are not punished but rather used as learning experiences to encourage and promote improvement. Good claims managers work the same way and openly praise success and work with mistakes to make people better and foster improvement.  It is important to have both. While this is business and there are certainly instances where continued failures must have consequences, regardless, working to correct mistakes often creates a more cohesive high performing organization.

Let’s be clear, Kindergarten Management is not saying employees are children and needed to be treated that way. That is not the message here. Kindergarten Management is going back to the basics and working to foster a fun but controlled working environment that encourages the overall development of not only the individual but the group as a whole.

What other lessons from the past would be good examples of how management?