It’s a balancing act: fraud versus fair settlement and loss costs with expenditures. As far as legal departments go, those working insurance claims for U.S. property and casualty (P&C) carriers are under constant pressure to drive operational efficiency, while providing quality customer service.
To find out how P&C claims shops are keeping a lid on costs, we surveyed 86 P&C claims or law departments through a third-party. Respondent tittles ranged from vice president of claims, to staff counsel and head of litigation.
Dan Ruderman, with the strategic consulting team, said the survey suggests legal and claims departments are focused on the “big picture” or the total cost of a matter, as opposed to targeting just settlement costs or just legal costs.
He recently presented results of the survey to a small group and his slides and analysis is embedded below. A complete report is available for download at no cost with registration: LexisNexis Property & Casualty Claims and Litigation Cost Containment Survey.
In an overview, here are six takeaways from the survey:
1. What are the top P&C cost containment initiatives?
- Early case assessment – 76%
- Electronic billing – 65%
- Staff controls/plans – 60%
- Flat fee arrangements – 60%
- Third party bill review – 51%
- Rate freezes – 48%
- Volume discounts – 44%
- Quick-pay discounts – 36%
- Discounts rates with success bonuses – 25%
2. Which cost containment techniques are effective?
Respondents that identified specific initiatives for cost containment were next asked to rate the effectiveness. Of those that use these initiatives:
- 98% said early case assessment is effective.
- 93% said e-billing is effective.
- 93% said staff controls/plans are effective.
- 87% said volume discounts are effective.
- 85% said flat fee arrangements are effective.
- 72% said quick-pay discounts are effective.
- 71% said third-party bill review is effective.
- 67% said rate freezes were effective.
- 65% said discount rates with success bonuses are effective.
3. Five easy opportunities for cost containment.
The delta between these two questions points to an opportunity for easy cost control wins. For example, the following are rated as effective techniques for maintaining costs, but a sizable percentage do not use these:
- 56% do not use volume discounts with success bonuses.
- 40% do not use staff controls/plans
- 40% do not use flat fee arrangements
- 35% do not use e-billing
- 26% do not use early case assessment
4. Outlook for outside counsel spending.
Over the course of the next 12 months most P&C claims shops said they intend to send about the same amount of work to outside counsel (56%). Notably about one-quarter (24%) said they plan to increase the volume of work sent to outside counsel, while 20% plan to decrease outside counsel spend. Those carriers with plans for increased spending may be forecasting more litigation and therefore demand for quality law firms, according to Mr. Ruderman.
5. In P&C, more litigation department grow than shrink.
Similarly, most P&C carriers (57%) anticipate staffing levels remaining flat while 39% plan to increase staffing. Just shy of 5% of respondents said their organizations plan to reduce staffing in the next 12 months. Mr. Ruderman noted this means litigation departments are growing rather and shrinking. He said the staffing changes could reflect either a shift in case assignments between inside and outside counsel – or increased efforts to resolve claims before these become matters. The latter aligns with previous answers in the survey noting high utilization and effectiveness of early case assessment.
6. Insurance carriers eye technology investments.
Most carriers expect technology spending to remain flat (57%) although 43% said they plan to increase spending on technology for cost containment purposes. Notably, not a single respondent indicated plans to reduce technology spending. P&C departments are increasing, or at least maintaining, technology investment to maintain operational efficiency according to Mr. Ruderman.
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An infographic with some of the data presented in the survey is freely available for viewing along with a registration for a PDF copy of the full report. Here are Mr. Ruderman’s slides: