Making Sense of the Data

In a recent conversation with CLM, Antonio Irizarry, managing partner and co-founder of CFI Consultants LLC, delved into the complexities of litigation metrics, the importance of clean and accurate data, and the strategies successful organizations employ to overcome data challenges. 

What follows is a transcript of that conversation, edited for length and clarity. 

CLM: How are the challenges of obtaining accurate litigation metrics data being addressed to ensure decision makers have access to meaningful information? 

Irizarry: I've had the privilege of working both on the law firm side of this and also with self-insureds and insurance carriers. Reconciling and organizing data correctly, and ensuring you have clean data, has been one of the most challenging aspects of getting everyone on the same page. When it comes to data reconciliation, the most effective approach we've found is to engage both sides of the equation—the law firm and the insurance carrier—to discuss the sources of their information and then weed out any discrepancies.

Coming into this process one-sided often leads to pushback and then you have to start from square one. If the goal is to gather information and adjust tactics and strategy, rather than weeding out underperforming individuals, it's best to have frontline communication with the law firm or vendor involved. 

Before having these conversations, it's crucial to have a clear understanding of the key performance indicators (KPIs) you're focusing on. If a law firm's internal KPIs for measuring associate and firm performance don't align with the client's objectives, the entire exercise becomes irrelevant. 

As part of my consulting work for insurance carriers and law firms, one of the first steps is to understand the motives behind the process. If the aim is to narrow down a panel counsel list, asking for their metrics might not be the best initial approach. However, if the goal is to gain a clear understanding of the data and eliminate inaccuracies, which could stem from various sources such as incorrect data entry, reconciling information from old claim systems, or inheriting or purchasing a book of business, it's essential to factor in all these aspects. 

Understanding the scope and ensuring data cleanliness is the first step towards having a productive conversation about metrics. 

CLM: What metrics do claims executives focus on most when it comes to litigation, and are there any important metrics that are often overlooked? 

Irizarry: For claims officers, the best claim is a closed claim, so they are primarily focused on cycle time, as their goal is to close claims efficiently. The longer a claim remains open, the larger the settlement amount tends to be, so being proactive is crucial.

Claims executives also closely monitor settlement values and how they correlate with claim duration. They also want to focus on where the claims are stemming from, so analyzing the geographic origins of claims and identifying "hot spots" will impact how and where they’re writing insurance policies.

Legal expenses are another key metric that can be further broken down and analyzed using billing systems and software. Associating this data with claim information and cycle time is essential for evaluating the fairness of a firm's pricing and its impact on claim duration. 

One often overlooked metric is the presence of aggravating factors. These factors can significantly increase settlement values, so it's important to register and consider them, either through checkboxes or designated fields in the claim system. 

But, volume and length of claims are going to be the big ones. 

CLM: What strategies have you observed successful organizations employing to overcome the challenges of incomplete, inaccessible, or ineffectively collected and stored data when it comes to litigation metrics? 

Irizarry: The defense bar struggles with sharing data due to the highly competitive nature of both the insurance and law firm sides. To be successful, it's crucial to eliminate the competitive mindset among panel law firms and foster a network focused solely on serving the client and providing the best results.

This can be a challenging sell for law firms that prioritize volume and exclusivity in their designated areas. However, holding panel counsel meetings to communicate the equal distribution of claims based on firm capabilities or specialties can help align everyone's goals. 

Insurance carriers can either leverage third-party services to pool and manage the information or handle it internally if they have the capability. Collaborative tools from vendors can provide lawyers with a more insightful understanding of what's being entered into the claim system, although this may not be the most effective approach. 

In addition, narrowing the reporting that the law firm is doing to give you the data that you want, and providing clear, concise guidelines for law firms can also improve data capture. Instead of relying on open-ended, paragraph-style formats, implementing platforms with specific data fields for hard numbers like settlement values, open dates, and demands can help alleviate issues surrounding data capture. 

But just sharing information on the defense bar side—we’re so far behind on that. We talk about it extensively at all the meetings that we go to, and then everybody goes back to their own firm or insurance company and they don't participate.

Q: How would you assess the current state of litigation metrics? Are they developed enough to yield meaningful results, or is more information sharing needed for the data to drive desired changes? 

Irizarry: Litigation metrics have been around long enough to draw some conclusions, but their effectiveness depends on a couple of factors. First and foremost, the data must be clean and accurate. Secondly, it's crucial to understand the story you're trying to tell with the data. 

You can shape the data however you want by excluding certain pieces or weighing certain things more heavily. The person designing the output ultimately determines how the data is presented. 

Drawing conclusions from the data is possible, but all parties invested in the data need to be on the same page. We're not yet at a point where we can fully implement predictive analytics for decision making or automate certain aspects of each case. Every claim has unique variables that impact the result. 

There still needs to be a decision maker on the claim handler side who takes the information from the data, combines it with their knowledge and experience, collaborates with colleagues and supervisors, and then makes a decision based on that. Automating things or putting them into a formula and expecting the same outcome every time is unlikely due to the numerous variables involved in law and claims handling. 

CLM: What are some good first steps for an organization that wants to start using claims metrics but is unsure where to begin? 

Irizarry: Before diving into metrics, it's crucial to understand what you're trying to achieve. Consider why claims metrics have suddenly become relevant to your organization. This introspection will help guide your selection of KPIs. 

Even if your organization isn't currently capturing all the necessary data, people are likely already thinking about these metrics informally. They may be taking notes, keeping tallies, or simply remembering certain outcomes. Engage with your team to understand how they manage claims and make decisions based on their experiences. 

Connecting with your claims handlers and vendors, including law firms, is essential before developing a new process. Failing to do so may result in a misaligned approach that requires revisiting. Invest time in understanding the capabilities of your existing technology as well. If you're using an outdated claims system, discuss potential upgrades with your vendor before investing in new solutions. 

Finally, explore what you can do with your current data. Even if you're not explicitly tracking metrics like cycle time, you likely have the necessary information, such as the date the claim was opened and settlement dates. With this data, you can start calculating the metrics you need using formulas. 

CLM: What advantages have successful claims organizations been able to leverage by effectively utilizing data and metrics in their operations? Could you provide any success story examples where an organization has been able to act on the data and demonstrate meaningful change in their approach to claims? 

Irizarry: Successful claims organizations that have been leveraging data and metrics effectively have been able to negotiate alternative fee arrangements with law firms. By understanding the metrics behind the law firms' results, insurance carriers can impact how much they are paying for legal services.

Additionally, having a grasp on settlement value ranges for different types of claims allows claims handlers to approach negotiations with plaintiffs more effectively. While each claim has its own unique circumstances, a general understanding of settlement value ranges is crucial to avoid setting the floor in the wrong spot and ensuring consistency among claims handlers. 

Furthermore, when considering acquiring a new book of business, understanding how it would fit into the current portfolio is essential. The more understanding an organization has of its current metrics, the more successful it can be in incorporating a different book of business. 

Staying on top of industry-level metrics is also crucial. Organizations that fail to keep track of their metrics risk falling behind their peers and may struggle to understand the market climate. Being able to leverage this knowledge in networking sessions or discussions with individuals in the industry can instill confidence and demonstrate expertise. 

CLM: What are the biggest obstacles to achieving a perfect world for litigation metrics where everybody benefits? 

Irizarry: Communication and information sharing among the defense side is one of the biggest prohibitive factors. Networking on the plaintiff side is far more advanced than what we have on the defense side. The competitive nature of the industry is really isolating that knowledge. 

Technology is changing rapidly, with artificial intelligence at the forefront of every conference, speaking session, and webinar. Factoring in AI to accelerate the tracking of metrics or decision making on the claims front is inevitable. However, it's crucial to understand the limitations and not rely on it for every decision. 

With so many different programs and technologies available, having a dedicated person who understands the tech part is critical. Throwing money at the first tech solution you encounter without proper vetting is likely to be unsuccessful. Dedicating time and energy to evaluating different tech resources and ensuring they align with your values and motives behind metric analysis is essential, albeit challenging due to everyone's busy schedules. 

Antonio Irizarry managing partner and co-founder of CFI Consultants LLC. airizarry@cficonsultants.com