New Strategies for Litigation Management of Property & Casualty Claims | Insurance Blog Clio

1. Litigation Strategy: Advanced Analytics and AI-Led Decision Support

The insurance industry has undergone significant transformation in recent years, driven by explosive growth in data availability and the migration of data to the cloud. This shift enables operators to easily access and combine data sources, including third-party information. As a result, insurers are forming new teams of claims experts and data professionals dedicated to discovering insights and unlocking value from data to improve how litigation claims are resolved and transform claims operating models.

Notably, the use of AI helps understand the expected cost and complexity of each case, helping to develop effective litigation plans and budgets based on combined insights from internal and external data sources. With a clear path to resolution, carriers can optimize litigation costs while ensuring more accurate settlements.

Other important use cases include:

Brief introduction of the plaintiff’s lawyer: By analyzing historical data, insurance companies can discover patterns in the behavior of plaintiffs who frequently file lawsuits against insured parties. This information can help insurance companies better understand the motivations and strategies of these attorneys, ultimately helping to develop more effective defense and negotiation strategies.

Strategic positioning: Operators can use internal and external data sources to create a comprehensive view of each case, incorporating information about the parties, location, case type and other relevant factors. This “single pane of glass” approach can inform decision-making and enhance collaboration between attorneys and adjusters, resulting in improved outcomes.

When assigning cases, it is critical to understand the relative size and scope of the group’s law firms and the ability to review historical case outcomes using the Litigation Analysis Record (LAR) described above. By leveraging attorney performance data, carriers can match case complexity to provide the best overall outcome for the claim through a customized attorney selection tool or framework. Additionally, knowing the number of cases assigned to each firm can help operators optimize the mix of open cases based on complexity, thereby maximizing the performance of their group of firms and attorneys.

Historically, attorney assignment was often based on the adjuster’s relationship with the attorney or the recommendation of his or her manager. However, developing attorney selection tools and frameworks to guide claims adjusters on the impact of assigned attorneys based on data and analytics may be a more strategic approach.

Insurer executives are under increasing pressure to understand how major expenditures support strategic needs, especially for items with significant financial impact, such as outside defense attorney fees. The top 50 operators spent an average of $500 million on litigation expenses in 2022, with outside attorney fees typically accounting for 80-90% of these costs, depending on their business scope, litigation strategy and in-house counsel capabilities.

However, chief claims officers often need to gain a clearer understanding of the overall results they are getting from these large payouts by focusing on the litigation costs and awards associated with these cases.

Leading carriers use data-driven solutions to gain insights into legal counsel performance to optimize legal spend. By combining claims record metadata with legal management and billing system data, carriers can identify top-performing attorneys, ensure compliance with carrier guidelines, and rationalize their legal groups to maintain high-performing resources.

Carriers often start by creating a hybrid scorecard that combines these disparate data sources to provide a single source of truth about firm and attorney performance and the results delivered.

An effective legal team is critical to effectively defending the insured when a claim is made, especially for commercial insurance companies. Some insurance companies have successfully highlighted the strength of their claims business to brokers and agents, convincing them of their ability to provide value beyond the price of the policy if needed.

Key use cases include:

Advanced case monitoring and upgrade paths

Carriers can leverage event-based triggers and expense tracking to monitor case progress against historical baselines provided by litigation analytics records. This enables them to make proactive decisions about escalating cases and allocating resources at the claim level, thereby promoting a proactive approach to claims file management. Automated management escalations triggered by flagging changes in claims data and expense discrepancies enhance oversight of pending documents, allowing frontline managers to effectively focus their time on their teams. Operators with high-quality data hygiene have taken further steps, allowing them to predictively process individual files before they deviate from the optimal path, improving outcomes.

Adhere to litigation plan and budget

Inaccurate budgets can lead to poor booking practices, especially for carriers who have no way of understanding the quality of the budgets provided by their attorneys. Spending and event-based triggers from litigation analytics records can provide visibility into cases that deviate from original litigation plans and budgets. These event-based triggers can help frontline handlers and managers stay on track when budget changes, spending forecasts, or task volumes deviate from expectations. Changes in these event-based triggers can result in proactive adjustments to litigation strategies based on the progress of the file. For example, if a claim is initially classified as “lower complexity” but exceeds 75% of the budget faster than the baseline, the adjuster can take remedial action or work with counsel to reconsider the filing’s litigation strategy.

Hybrid scorecard for group scoring and stratification

Many carriers allocate cases unevenly among panels, with typically 80% of cases and paid losses handled by state-owned companies operating across multiple lines of business and states. Leading carriers utilize hybrid scorecards that not only evaluate law firm and individual attorney performance based on claim type, but also measure compliance with their operating guidelines to improve overall results. Matching claims queues to historical claims outcomes for attorneys and companies allows carriers to separate top performers from the rest of the group (or in-house counsel). At the same time, it streamlines the assignment of the most challenging cases and allocates the best hourly rates to top-performing firms and attorneys, ensuring their proven expertise is leveraged where it has the most impact. This strategic shift toward evidence-based panel management optimizes resource deployment and steadily improves overall claims outcomes.