Claims organizations are under increasing pressure to manage the legal expense associated with claims litigation.
Executive Summary
Carriers with flat premium earnings, increased litigation frequency and billable hours, and corresponding growth in law firm rates need new ways to manage claims legal performance. Leading carriers are integrating claims and legal data and developing multivariable predictive models to facilitate decisions on counsel selection, case budgeting, and litigation vs. alternative dispute resolution.The legal spend for the P/C insurance market remained flat at $21.3 billion from 2008 to 2012 while premiums shrank, according to SNL Financial and PwC analysis. Legal service utilization has been higher than expected due to a general increase in claim complexity and severity; 3-4 percent increases in law firm rates, litigation frequency and billable hours over the last five years; and a higher focus on short-term productivity for adjusters. As a result, we have seen a 5-15 percent increase in overall legal expenses for many U.S. P/C insurance carriers from 2008 to 2012.
