This is an excerpt from CaseGlide’s Definitive Guide to Transformational Improvement in the Insurer Legal Department.
Issues in insurer legal departments
Background on insurance claims litigation case management software systems
The issues in insurer legal departments stem from one simple truth that is rarely uttered – the legal system is not an effective place to adjust insurance claims. Although insurers have a duty to pay covered claims and deny those for which there is no coverage, the truth is that lawyers, judges, and juries are more likely to make matters worse than uphold a policy provision. Long ago, intelligent insurers acknowledged that they owed a duty to their shareholders and policyholders to prevent the courtroom from unnecessarily draining more money out of the policyholders’ reserves.
With that acknowledgment came the responsibility to try to control the litigation process as much as possible internally, rather than delegate claims to lawyers. Unfortunately, most insurers would agree that their legal departments have not made enough progress in managing litigation to solve the fundamental problems. In this article, we discuss the evolution of the insurer legal department and what the leading insurers are doing today to manage litigation with technology.
Over the past ten to fifteen years, property and casualty insurers have tried solving litigation problems in a number of ways, but many are merely treating various symptoms of a flawed legal system rather than solving the global problem. Insurers started with in-house and coordinating counsel to manage litigation. When those managerial posts proved insufficient by themselves, insurers turned to manually documenting the pieces of the process. They created litigation guidelines and conducted legal bill auditing on those guidelines to rein in legal spend. Then came the technology boom. Insurers now could use software to enforce those guidelines.
Over time, litigation software proved to be helpful but not transformative. Despite management’s continuous pressure in the face of skyrocketing legal fees and an increasingly litigious environment, legal departments could not get much more than marginal gains out of their chosen software tools: generic case management and e-billing software. Making matters worse, even those marginal gains have disappeared over time for most insurers.
Why wasn’t traditional case management and e-billing software the key to transforming insurance claims litigation? Because they were incomplete offerings that focused on minor legal fee reductions and document-sharing rather than transformative bottom line results. Case management and e-billing systems treated minor symptoms of the litigation problem for property and casualty insurers, but not the problem itself.
It is no surprise that the leading case management and e-billing software providers did not solve the fundamental insurance litigation problems. Only a few people at each insurance company used the software. Their jobs got easier, but nothing helped the tens to hundreds of thousands of adjusters, executives, and law firm personnel handling the cases. Eventually, executives were no longer impressed by the percentage points gains by these traditional software providers. Meanwhile, litigation frequency and severity continues to skyrocket.
That is because the case management and e-billing software providers did not focus on insurance claims litigation. These litigation software providers served companies of all types – retail, banks, and other organizations who had legal bills and shared legal documents. Despite property and casualty insurers spending tens of billions of dollars per year in legal fees, none of these providers ever created a software system just for them. When insurance executives looked to their case management and e-billing technology providers to find their best attorneys, they were all surprised to find out that they did not have the answer. Without insurance-specific demographics and outcome data allowing for an “apples to apples” intelligent analysis on each case, it was difficult to get more than simple expense information about attorneys.
What now with insurance claims litigation case management software systems?
When they review their growing legal fees and litigation volume, property and casualty insurers are now seeing that they need more than standard expense information and document portals.
- Insurers’ executives and claims management continue to put pressure on litigation management to improve the legal department.
- Insurers are frustrated with litigation department performance and ready to take action.
- Legal departments are under significant pressure to reduce legal expenses.
- Legal departments are committed to making data analytics and business intelligence a foundation of their processes.
- Insurers are demanding that legal departments handle more cases with less and less staff.
- Insurers are tired of no results from case management software and marginal results from billing litigation software and ready to change.
Offerings in the marketplace: a closer look
Traditional insurance claims litigation case management software systems
With time, it has become clear to everyone that most so-called case management software platforms are merely portals to upload documents. These systems are usually the most incomplete of the litigation software tools.
Because most case management systems are not designed for insurance litigation, they are generic, do not improve collaboration or reduce legal expenses, and provide zero analytics. Without any place to efficiently collaborate and collect valuable data, adjusters and lawyers do all of their expensive and time-draining communication in Microsoft Outlook. Then the adjusters are tasked with mirroring all of that communication into their claims system.
The problem lies in the fact that the traditional case management systems do not have the right process for implementing at insurance companies. These companies offer enhanced collaboration, automation, and analytics, but only if the insurance company dedicates their insurance claims experts to do the heavy lifting. If insurers leave it to the sales reps at the case management software companies or assign internal experts with other jobs to do, insurers wind up with document repositories instead of truly advanced software for their business.
Years ago, e-billing software helped insurers make significant strides in legal fee transparency and management; however, this tool has proven to be a necessary yet marginal piece to the litigation puzzle. For insurers with mature e-billing processes, these systems have merely become a place for law firm administrators to send legal bills and save a few percentage points in legal fees.
E-billing software provides useful transparency; however, insurers have difficulty taking action on the data. Expense data alone tells significantly less than half of the litigation story. E-billing software does not have the demographic or case outcome data to help insurers compare “apples to apples.” It is time to realize that insurers need much more than expense ledgers to run their litigation departments. Although e-billing provides an administrative foundation for strong results in the legal department, insurers need much more if they seek to make any more improvements in litigation.
Legal bill auditing
Like traditional case management and e-billing software, legal bill auditing provides necessary but incomplete benefits. Legal fee auditing companies review and reduce legal bills for a brief period of time until equilibrium is reached. After a couple of years, law firms adapt their billing entries to fit within the auditor’s guidelines, and the auditing becomes more of an expense than a solution. Meanwhile, these companies create environments of ongoing conflict between business partners doing their work the way they know how to do it yet no longer getting paid the same.
Again, like the other standard offerings in the marketplace, legal bill auditing is necessary, but more mature litigation departments understand its limitations.
Coordinating counsel can be the most complete litigation department solution of the offerings discussed; however, insurers using coordinating counsel often do more harm than good. Coordinating counsel rarely come with clear financial metrics and efficient management tools.
Coordinating counsel and the insurers implementing them have the right ideas: collaboration, knowledge management, legal document templates, and litigation process design. Property and casualty insurers, however, have too much volume to implement these processes without automated, streamlined management software. As a result, well-meaning insurers are often left footing enormous legal bills when coordinating counsel drastically increases insurers’ expenses. Ultimately, insurers using coordinating counsel solve some problems but usually create new ones, too.
Differentiators: how are some insurers achieving transformational improvement in the legal department?
Background on insurance claims litigation case management software systems
Insurers need integrated solutions that solve litigation problems rather than minor symptoms. Insurers need to obtain efficient, less expensive, and better outcomes in litigation. Insurers need all stakeholders – executives, adjusters, attorneys, and legal staff – responsible for meeting and empowered to satisfy insurers’ business objectives.
Insurers need an actual case management system. One that catches the attention of the executive teams and management. Insurers need a complete case management solution that solves their biggest litigation problems: expensive and ineffective collaboration; overwhelming manual administrative hassles; and little actionable business intelligence.
Differentiating features of a transformative insurance claims litigation case management software systems
Leading insurance litigation department utilize advanced case management systems designed specifically for insurers and their law firms. These case management systems help insurers and their law firms:
- Collaborate efficiently using check-the-box and fill-in-the-blank workflows instead of lengthy emails and Word documents
- Review case updates by skimming news feeds searchable and sortable by any case facts, including disposition strategy, favorability ratings, and priority level, rather than by the order in which it hits their inbox
- Eliminate duplication of tasks by having attorneys directly enter their updates into the insurer’s system
- Reduce the time and expense of routine tasks such as legal document creation by automating them
- Obtain actionable business intelligence by requiring all key case information to be entered into searchable, sortable, and data visual-ready fields
- Identify who their best attorneys are in a democratic way; namely, through real-time “apples to apples” comparisons on expense and performance
Insurers that have advanced past the traditional case management and legal bill auditing processes have saved more than 40% of their legal expenses while obtaining better frequency and severity outcomes. Advanced insurance litigation departments have dominated the marketplace by solving the problem, not treating the symptoms. No one handles property and casualty litigation better than forward-thinking insurers with the right case management partner.
Modern litigation departments implement integrated case management systems that empower everyone to solve fundamental litigation problems. These litigation executives make adjusters’ and lawyers’ jobs easier so that they can save more than 40% of their legal fees. Instead of relying on incomplete solutions and people without claims experience, advanced litigation departments refuse to partner with systems that require them to do all the heavy lifting to get any results.
Today, top litigation departments use technology focused on the priorities, not the minor details: improved productivity, better bottom lines, and actionable business intelligence. Advanced legal departments use check-the-box and fill-in-the-blank workflows to streamline collaboration like a coordinating counsel would, but with measurable results. They use automated legal documents to eliminate expensive and wasteful processes in litigation, rather than asking attorneys to do the work the old fashioned way and then refusing to pay. Of utmost importance, these forward-thinking litigation leaders use actionable business intelligence to take action in their litigation departments.