Claims organizations are under increasing pressure to manage the legal expenses associated with claims litigation. 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. A general increase in claim complexity and severity, a 3-4% rise in law firm rates, and greater litigation frequency and billable hours over the last five years, as well as a higher focus on short-term productivity for adjusters, have driven higher-than-expected legal service utilization. As a result, there was a 5-15% increase in overall legal expenses for many U.S. P&C insurance carriers from 2008 to 2012.
For these reasons, P&C insurers need new ways to manage claims legal performance. Leading carriers are integrating claims and legal data and developing multi-variable predictive models to facilitate decisions on counsel selection and case budgeting, as well as on choosing to litigate or opt for alternative dispute resolution (ADR).
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