New Paths in Litigation Management:

Transcription

1 New Paths in Litigation Management: Leveraging Data to Improve Outcomes and Cost Kevin Combes, Director, Risk Control Claims & Engineering Pradnya Nimkar, ACAS, MAAA Consultant & Actuary

2 Litigation Management Defined Planning, controlling, and monitoring the litigation process to: Achieve earliest possible resolution Minimize legal costs Achieve the most optimal outcome possible

3 Litigation Study Context Severity continues to trend negatively in CA and elsewhere WCIRB reports estimated increase in WC indemnity severity at 15% over 2012 to Paid ALAE per indemnity claim: Since 2012, the average has increased 26%. Driven by cost containment and Litigation Expense Legislative uncertainty Increase in litigation volume follows in the wake of reform. Liens: Following a sharp decline in liens from 2013 to 2014 (after passage of SB863) the total number has nearly doubled from 2014 to 2015.

4 Litigation Study Context Lack of objective measures of performance Mostly subjective Not focused on litigation outcomes Litigation is most significant cost driver across all lines of coverage Common theme for every organization Sample demonstrating impact of litigation on incurred values

5 What We Did Developed an actuarial algorithm to identify performance differences between defense firms Adjusts for differences in severity/complexity, volume, case load composition, etc. Assessed $0.6B in incurred values Over 2.2M transactions Over 3,500 litigated claims Primarily California WC Using Statistical methodology, we were able to quantify the differences in attorney performance.

6 Differences in Performance Legal Fees

7 Differences in Performance Legal Fees

8 Differences in Performance Outcomes

9 Difference in Performance Client Performance v. Industry Attorney Firm name Final (Adjusted) Score Rank Attorney Firm Attorney Firm Attorney Firm Attorney Firm Attorney Firm Attorney Firm Attorney Firm Attorney Firm Attorney Firm Attorney Firm Attorney Firm C (Client) Attorney Firm Attorney Firm Attorney Firm Attorney Firm Attorney Firm Attorney Firm Attorney Firm C (Industry) Attorney Firm Attorney Firm Difference in performance relates to client s engagement in Litigation Management process Clients less engaged in process (as defined by presence or absence of formal litigation management program) experienced similar adjusted scores compared to Industry In this example, the client performance was 26% better from a adjusted score perspective compared to industry

10 What we have learned Invariably there are differences in firm performance There are significant differences between firms in the legal expenses charged for similar injury types/causes of action There are significant differences between defense firms in outcomes produced There are difference in performance of a single defense firm between client and industry We can model changes to panel mix to drive outcome performance improvement.

11 What do differences in performance mean from a balance sheet perspective? Important to understand from 2 perspectives Leakage (historical) Savings (predictive analytics)

12 Leakage

13 Savings

14 What else have we learned? Time is Money! Duration effects Legal cost $7, $6, $5, $4, $3, $2, $1, $- Defense Firm A Defense Firm B Defense Firm C Defense Firm D Defense Firm E Defense Firm F 800 Average Legal Fees Duration (in Days)

15 What else have we learned? but not necessarily outcomes

16 Take-Aways Defense attorney performance significantly varies between defense firms Clients with formal Litigation Management programs in place outperform industry There are metrics now available to objectively evaluate firm performance Adverse panel selection can significantly impact your balance sheet

17 Common Litigation Management Program Weaknesses Wrong person in the litigation manager role No written guidelines Guidelines not followed / lack board or member support Lack legal bill review process For pools, implementation lacking at member layer Lack of quality data and metrics

18 Practical Litigation Management Solutions Litigation Management Guidelines Litigation Cost Analysis Develop written Litigation Guidelines to drive consistency and sustainability of legal panel Sets expectations aligned with your organization s goals and objectives Establish Key Performance Indicators (KPIs) Litigation Cost Containment Reduce legal spend based upon compliance, best practices and spend management Actionable data to manage firms and program Faster, more efficient legal bill processing gets claims closed faster Create greater accountability of firms engaged

19 Take-Aways At a minimum: Understand what drives cost in your program Educate board / members on advantages of early resolution / importance of litigation management Develop written guidelines Board or General Counsel to review / adopt Require defense counsel sign-off Implement a legal bill review program Use metrics to evaluate performance Review results with defense counsel Annually report results to board

20 Contact Info Kevin Combes Director Aon Risk Solutions Global Risk Consulting Risk Control, Claims & Engineering 100 Bayview Circle Newport Beach, CA t kevin.combes@aon.com Pradnya Nimkar, ACAS, MAAA Consultant & Actuary Aon Risk Solutions Global Risk Consulting Actuarial & Analytics 60 South Market Suite 1100 San Jose, CA t pradnya.nimkar@aon.com

21 Questions?