The 2015 CLM Litigation Management Study, underwritten by Wolters Kluwer ELM Solutions, provided insights into the thoughts and initiatives of claims executives across the P&C industry. I cited some of the findings at the recent 2016 CLM annual conference, where I led a session on panel management and performance measurement. For example, 96% of respondents say their organizations use panels of pre-approved firms to defend their claims litigation. In addition, many indicate that they are consolidating these panels, with respondents indicating that their panel size has dropped by an average of 8 firms.
Survey participants identified law firm effectiveness and performance as a key strategic initiative. This type of program can be invaluable when making decisions during panel consolidation, yet law firm performance management - measuring success against a defined set of criteria - is formalized by only 64% of participants. I was encouraged, though, by the questions asked by our CLM panel attendees. Many are planning or implementing performance measurement and sought advice on which metrics to implement and how best to communicate with firms – this is a move in the right direction for insurers.
Implementing Performance Measurement
Building a performance management program takes forethought and requires a commitment from the claims litigation organization to data-driven decision-making. Key elements for success include:
- Setting program goals from the very beginning and adjusting them as new trends present themselves
- Encouraging feedback from everyone involved, including law firms, in order to make sure the objectives are clear and attainable – firms can’t hit unclear targets
- Starting with a manageable and scalable set of criteria that makes sense for your organization to measure
It’s important to make sure those managing both sides of the law firm/claims professional relationship agree on the program goals and are committed to realizing them. Equally important is following through on collecting the day-to-day data that drives a holistic program. Build a way to rate your attorneys’ performance into the case-closure process to ensure the feedback is captured while the experience is still fresh and relevant. Keep the rating process quick and simple to foster adoption and encourage honest feedback.
Finally, identify tangible areas of importance for a department or practice area and create target metrics that represent reliable indicators of success. Consider:
- Expense and loss ratios
- Process compliance and audit results
- Budget and reserve accuracy
- Policy holder satisfaction ratings
- Number of cases opened and closed
Performance Measurement Should Include Objective and Subjective Data
Measuring the success of outside counsel is a mix of art and science. Most organizations have access to objective metrics, which usually focus on financial and operational data such as legal costs, case cycle times, and average costs per claim, line of business, or firm. This objective data is critical to understanding the bottom line impact of a firm’s performance.
However, it is just as important to capture “soft” data about working with a firm and its attorneys – the subjective data from the claims professionals that deal with outside counsel on a regular basis. This information, such as attorney responsiveness, proper staffing, adherence to budget, and communication skills, fills in the gaps that numerical data alone can’t address.
Tracking of soft skills is especially important for mid- to small-size insurers that may feel greater repercussions from attorney behavior. For instance, an increase of $1 million in reserve has a huge financial impact on a smaller company, and if counsel isn’t quick to inform their client of this change, it could cost them their panel position. Measuring performance in these subjective areas can pinpoint whether an issue is with a certain individual or firm-wide. You can then have a conversation and re-align expectations with the firm in order to correct any issues that could risk their panel inclusion.
As our CLM panel members emphasized, no single piece of data tells the story. It’s the combination of objective and subjective data that provides the full account. And most importantly, the metrics need to evolve just like the overall program. Keep those that spark performance improvement and drop those that don’t.
Communication is Key
Claims executives may wish to keep some of their performance measurement criteria close to the vest, but sharing the overall objectives and expectations with panel firms is essential. Our CLM session panelists agreed, on both the client and firm side, that panel firms are most effective when they are true partners. Communicate frequently with them, setting expectations that they will do the same. Cookie-cutter approaches help no one, so ask them for case plans and to prove their understanding of each case’s unique nuances. Meet at least annually with firms, being bluntly honest and open, because that is the most effective tool for improving the relationship.
Implementing effective solutions is a critical part of performance measurement and panel management. Enterprise Legal Management technology is designed to automate claims litigation processes, improve efficiency, and capture the metrics that empower informed decisions. This technology is indispensable in driving key improvements within the claims organization that ultimately help to meet the carrier’s overall business goals.
For more information, download the informative new eBook Insurance Claims Defense: Panel Management and the Performance Imperative.