Technology: maintaining a cutting edge


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With information technology playing an increasingly substantive role in the running of captive entities, its application in law, claims management and e-billing are explored.

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Technology: maintaining a cutting edge

  1. 1. Technology:maintaining a cutting edge42 emea captive 2012
  2. 2. Gary Markham, Legal Solutions GroupWith information technology playing an increasingly substantive role in therunning of captive entities, its application in law, claims management ande-billing are explored.G ary Markham, chief executive of the Legal Solutions demonstrated as completely eroded. Effectively, coverages are being Group, provides insights into three areas of information disputed where it cannot be shown that full erosion or exhaustion of the technology and litigation that pertain to the captive sector: SIR is proved. Several cases can be cited, with a proportion spawning litigation management, retention and deductible tracking fresh errors and omissions (E&O) claims for claims mishandling or and the attractions of e-billing. alleged negligence in fiduciary duty, among the most common.Where does your organisation fit on the ‘scale of Figure 1: The evolution in litigation managementsophistication’ in litigation management? Litigation management, including its related cousins of legal spendand cost control, is not a new phenomenon. They have all been aroundin various guises, especially in the insurance market, for well over adecade, but litigation management is evolving rapidly in the economicdownturn. With the advent of universally applied invoice or billingformats, the science of litigation management has evolved. Demonstrable performance measurement data show that the use oftechnology in the field of litigation and legal spend management generatean economically sound business case for adoption and implementation. Figure 2 presents a more definitive explanation of the various stages,as well as the benefits that each stage offers to organisations thatchoose to upgrade their litigation management strategy.SIR and deductible tracking: relieving the risk of E&Oclaims, coverage disputes and exposure As world economies have tightened, so has the trend in the insuranceindustry towards larger self-insured retentions (SIRs) and policy Figure 2: Added benefits of stages of litigation managementdeductibles. By increasing an SIR or retention limit, premiums can be Definition Added benefitnegotiated downward by the insured or client. The flipside of reduced Stage 0: • Manual, paper-based system • Nonepremiums is increased responsibility on the part of the insured for Stage I: • Paper-free billing • Cost and time savingssettling (in the case of SIR) or contributing towards claims costs (in • Opportunities for Bill Review • Guidelines compliancethe case of retention), in the event of an occurrence which triggers the Stage II • Paperless claims feed & • Centralised data repositoryinsured’s policy with the insurance carrier/s. matter creation • Guaranteed management • Electronic invoice review & oversight As SIRs are the sole responsibility of the insured, there has been approval • SarbOx & internal auditgreater focus and attention to detail on the part of the carrier, to ensure • Vendor selection, compliantthat full and proper fiduciary duty has been met and that erosion of the on-panel/off-panelSIR may be demonstrated. Stage III • Budgeting • Budget tracking tool to With larger deductibles, insurance carriers are being challenged legally • Case planning tools measure cases • Report cards & MI reports • Reports to review LSPas to their rights of settlement, where the deductible forms a significant performancepart of the claim payout, for both allocable claims adjusting expenses • Paper completely removedand indemnity or damages. Several cases related to deductibles have from processbeen tried in favour of the carrier. Stage IV • Ability to monitor internal • Higher levels of compliance case handling • Proactive litigationCoverage disputes • Advanced budget billing management principles Coverage disputes are not uncommon in the insurance industry. controls embedded in companyHowever, a growing and worrying trend is beginning to emerge related • Detailed senior management culture reportsto claims for coverage, where the SIR has to be fully and properly emea captive 2012 43
  3. 3. Figure 3: The detailed process for SIR and deductible trackingE&O claims In the context of the corporate legal market, e-billing has been in use E&O claims are also being brought against third party (claims) for around 20 years. The legal electronic data exchange standardsadministrators (TPAs), wherein claim-file mishandling is being alleged (LEDES) have become the de facto format for the e-billing the insurance carrier or in some cases the insured, where a large Time and billing software vendors supporting their service providerdeductible is involved in settling the case/claim. clients have created LEDES tools, plus the growing litigation vendor marketplace (where Legal Service Group operates), has similarly ledOffsetting risk and exposure the way forward. Technologies and other tools have been designed and are available Legal services providers (LSPs) across the globe utilise various time,to assist in the tracking of SIRs, in order that proper and full exhaustion billing and accounting practice management software systems, basedor erosion may be proven and demonstrated to have been managed in on non-compatible platforms, collecting varying and inconsistent setsaccordance with the terms of the insurance policy. of billing data. For the client, the submission of multiple invoice formats presents serious data collection and interpretation issues. Generating These tools will provide for the application of current litigation andlegal spend management protocols to be applied from dollar one, reports on a basis of expenses per case, per service provider, forthus protecting the needs of the insured, as well as satisfying the example, is made that much more difficult.requirements of the insurance carrier, under the policy. An e-billing methodology which uses a common, industry-wide They also lend themselves to tracking the deductible or early claims standard such as LEDES helps to overcome most of these hurdles. Thecosts, in order that the insurance carrier can make better informed ability to submit invoices electronically also offers the client and the LSPdecisions over settlement and resolution of the claim. the means to transact globally, with very low operational costs. The benefits of adopting an e-billing software system are wellTransparency is the key documented, and include the ability to collect data consistently and By utilising workflow technology and electronic matter management, correctly. Removal of duplicate invoices, duplicate billed entries,SIR and deductibles can be tracked from the first dollar. The data from mathematical errors, hourly/other rate checks, and validations beingthis process provide transparency on the effectiveness of the claims done automatically are other benefits of a system which, implementedadjusting/handling and reduce ambiguity over coverage. correctly, will generate an overall cost saving. Managing a paper-based system is expensive, slow, hard toWhat is meant by ‘e-billing’? measure or audit, and harmful to the environment. Plus it’s open The vast majority of fee-paying clients operate using paper- to significant human error due to interpretation, re-keying manuallybased invoice submission, review, approval and payment on to a PC, and an inability to ensure compliance versus clientprocessing systems. However, the final step in accounts payable is billing guidelines.typically electronic. That leaves a large disconnect between service providers who are What are the barriers to moving from paper to e-billing?submitting bills and aiming to generate a faster turn-around and The general answer is ‘there aren’t any’. It’s now possible to setimproved cash-flow, and their clients’ ability to process invoices quickly up a local, national and/or global e-billing solution for a client and allvia internal business processes and management authorisation. its divisions anywhere Internet access is available. This is due to the44 emea captive 2012
  4. 4. Figure 4: Example of how an e-billing system worksubiquity of web-based or application service provider model software for loading their invoices into the client’s system. The client simplysolutions, plus the fact that the cost of setting up and maintaining such needs to approve and process these for payment, all of which can besystems has dramatically decreased over the years. dealt with electronically from within the same e-billing application. Removal of paper from the billing process is also helping theWhat does it cost and what will my staff say about it? organisation to meet its CSR policy commitments, as such a system is The cost is typically based on the users, or the billing volumes viewed as green technology.involved, plus the local or global nature of the implementation. Staffwho are currently processing paper invoices should be happy aboutremoving paper from their in-trays. Gary Markham is chief executive of the Legal Solutions Group. In the e-billing world, professional service providers are responsible He can be contacted at: emea captive 2012 45