US Property and Casualty Litigation Management and Cost Control Strategies | September 2015

Dan RudermanCounselLink Strategic Consultant

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Agenda

• Introduction

• Results:o Top cost control initiatives

o Priorities

o Tools to manage costs

o Looking ahead

• About the Survey

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Top Cost Control Initiatives

Bill Review System/Process

• “Legal bill review training of staff adjusters”• “Initiating 3rd party bill reviewer”• “Centralized review of billing and budget”• “Bill review of defense billings”• “Auditing legal billings”

Q. What single cost-control initiative planned for implementation in 2015/2016 do you view to be the most relevant and important to your litigation management program?

Vendor Management• “Choosing the right attorney for the claim” • “Moving to regional counsel”• “Downsizing and/or changes in our pre-approved

law firms”• “Working with panel counsel to cut costs” • “Retention of cases in house “• “Consolidation of coverage counsel to regions,

hopefully this will streamline the process.”

Reducing Legal Defense Costs• “Reducing defense costs by settling on a cost of

defense basis”• “Control defense costs”• “Agreed litigation plan and sticking to it”• “Reduction of defense costs “

Early Assessment/Litigation Prevention• “Complete thorough investigations and complete

case assessment as soon as possible.”• “Attempting to evaluate claims more efficiently

to arrive at a fair settlement figure in order to avoid litigation costs. “

• “We will try to move our legal files to Mediation sooner rather than later”

Litigation Management Effectiveness Remains Highly Important

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2015/2016 P&C Cost Initiative Priority

Q. In 2015, which of the following is thehigher priority for your Law Department:

P&C respondents overwhelmingly believe reducing settlement cost/loss and legal cost to defend a claim are equally important. (72%)

Companies are looking at the “big picture” or whole cost of the case

• Only targeting settlement costs or only targeting legal costs could negatively impact the combined ratios at their companies.

Walking the Dynamic Fiscal Tightrope between Settling or Litigating

0%10%20%30%40%50%60%70%80%

5.9%

22.1%

72.1%

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Q. In general, do you believe the more money you spend on the defense of a matter, the more your loss costs are reduced?

2015/16 P&C Cost Initiative Aligns toBalancing Act Claims and Law Department

Pay the Right Amount, to the Right Firm, for the Right Defense

P&C respondents overwhelmingly do not believe that the more dollars spent on the defense of a matter, the more loss costs are reduced (6x%)

On average, 20% of claim defense total costs are legal costs:• Good litigation management and

aggressive cost control programs may be seen as more effective approaches to attain the best defense.

Yes No Unsure0%

10%

20%

30%

40%

50%

60%

70%

7.4%

64.7%

27.9%

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Early Case Assessment

Electronic Billing

Flat Fee Arrangements

Staffing Controls/Plans

Third Party Bill Review

Rate Freezes

Volume Discounts

Quick-pay Discounts

Discount Rate with Success Bonuses

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

What tools are P&Cs using to manage costs?

MajorityUsing:

Q. Cost-control initiatives used

Early CaseAssessment

Flat Fee Arrangements

ElectronicBilling

StaffingControl Plans

Third-PartyBill Review

60%76% 65% 60% 51%

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Less thanhalf using:

Less than1/3rd using:

Q. Cost-control initiatives used

What tools are P&Cs using to manage costs?

RateFreezes

VolumeDiscounts

Quick PayDiscounts

Disc’t Rates w/Success Bonuses

48% 44% 36% 25%

Early Case Assessment

Electronic Billing

Flat Fee Arrangements

Staffing Controls/Plans

Third Party Bill Review

Rate Freezes

Volume Discounts

Quick-pay Discounts

Discount Rate with Success Bonuses

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

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Early Case Assessment

Electronic Billing

Flat Fee Arrangements

Staffing Controls/Plans

Third Party Bill Review

Rate Freezes

Volume Discounts

Quick-pay Discounts

Discount Rate with Success Bonuses

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

98%

93%

85%

93%

71%

67%

87%

72%

65%

Getting to the Right Price/Cost

Utilization rates range from 25% to 76% even though effectiveness rates range from 65% to 98%!

Q. Please rate the effectiveness of the following cost-control initiatives used by your organization:

(Rated: Very Effective/Effective)

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Lots of Opportunity to Reduce Costs

Significant opportunity for improvement if adoption increased

Defined Pathways to Greater Operational Effectiveness

Early

Case Asse

ssment

Electr

onic Billi

ng

Staffing Contro

l Plan

s

Volume Discounts

Flat F

ee Arrange

ments0%

10%20%30%40%50%60%70%80%90%

100%

26.0%35.0%

40.0%

56.0%

40.0%

98.0% 93.0% 93.0%87.0% 85.0%

EffectivenessDo Not Use

101 out of 4 plan to increase assigning matters to outside counsel

Assigning Matters to Outside Counsel (OC)

• No change – two thirds• 25% plan to increase matters

assigned to OC (increased demand)

• Small percent expecting less litigated case

Q. In the next 12 months, how will matters assigned to outside counsel change in your department:

Expected changes in the next 12 months

Increase Remain the Same Decrease0%

10%

20%

30%

40%

50%

60%

70%

25.0%

62.5%

12.5%

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OC Spend remains flat (56%) with nearly equal numbers anticipate increasing (24%) as anticipate decreasing spend (20%) however….

2015 CLM Litigation Mgmt. Survey indicates almost 50% of respondents expect an increase in Litigation Inventory

Reflects Dichotomy of Carrier Perspectives1) Positively impact cost by

assigning more to OC2) More efficient in terms of cost

per case to keep matters in-house

Q. In the next 12 months, how will outside counsel spend change in your department:

Forecasted change in the next 12 months

Respondents are split on outside counsel spend plans

Increase Remain the Same Decrease0%

10%

20%

30%

40%

50%

60%

23.6%

56.4%

20.0%

122 out of 5 P&C respondents plan to increase staffing

Staffing levels for a majority of carriers remains flat (56.5%) however….

Litigation departments are growing (38%).

Staffing change could reflect:1) Changing mix of case

assignment between inside and outside counsel or

2) Increased effort to resolve claims before they become matters

Q. In the next 12 months, how will staffing change in your department:

Forecasted change in the next 12 months

Increase Remain the Same Decrease0%

10%

20%

30%

40%

50%

60%

38.7%

56.5%

4.8%

13100% plan to maintain or increase their technology spend

Technology Investment by carriers is increasing or holding steady

Maintaining or investing more in technology may be the way to achieve 2015/16 priorities:

• Operational excellence• Litigation management• Cost control

Q. In the next 12 months, how will technology spend change in your department:

Forecasted change in the next 12 months

Increase Remain the Same Decrease0%

10%

20%

30%

40%

50%

60%

43.4%

56.6%

0.0%

14Technology & staffing investment are favored means to meet objectives

Pay the Right Amount, to the Right Firm,for the Right Defense

Technology Spend Staffing Matters Assigned to Outside Counsel

Spending w/ Outside Counsel

0%5%

10%15%20%25%30%35%40%45%

43.4%

38.7%

25.0% 23.6%

0.0%

4.8%

12.5%

20.0%

IncreseDecrease

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Summary

Critical Priorities: Management of litigation costs primarily early case assessment and defense, vendor and bill review costs.

1. The next 12-18 months will see a continued focus on operational effectiveness

2. Most executives believe that reducing settlement cost/loss and reducing the legal cost of defending a claim are equally important.

3. Paying the Right Amount, to the Right Firm, for the Right Defense continues to drive P&C operational effectiveness initiatives and investment decisions.

4. Immediate opportunities remain in the industry for cost containment.

5. 35 percent could potentially benefit from an Enterprise Legal Management system for ebilling.

6. Over 40 percent could potentially benefit by using an Enterprise Legal Management system to manage Alternative Billing Arrangements such as volume discounts and flat fees.

7. Planned investments in technology spend should be directed at the cost containment initiatives with the highest rates of effectiveness.

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Download a PDF Copy of the Study

View the infographic or download the complete study (PDF):

LexisNexis Property & Casualty Claims and Litigation Cost Containment Survey

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About the Survey

Survey Respondents:

• 86 claims and/or law department professionals working for U.S.

based property and casualty insurance carriers

• Respondent Titles: VP of Claims, Attorney, Associate/General

Counsel, Staff Counsel, Head of Litigation, etc.

• Companies surveyed had a wide-cross section of outside counsel

spend ranging from <10 million to >$500 million

• Online Survey conducted: June 16, - July 2, 2015

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Strategic Consulting

Dan Ruderman is responsible for business development in the Strategic Consulting Group at the LexisNexis Business of Law and Litigation Software division.

With over 25 years leadership experience Dan advises Fortune 1000 corporate legal clients on operational excellence, matter and legal spend management, and outside counsel management, with particular expertise in helping insurance company claims departments. He has helped some of the country’s best-known claims legal departments institute techniques and programs that led to dramatic process improvement, as well as significant control over litigated claims’ costs.

Dan is a Claims and Litigation Management (CLM) Alliance Fellow and National Committee member, and a member of the Risk Insurance Management Society. He has a bachelor’s degree from Cornell University.

Dan RudermanStrategic Consulting

Account ExecutiveLexisNexis CounselLink

@DanRuderman2

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