The document outlines a "CASCADE Trial Strategy" to address rising legal claims and recoveries against an insurance company (AZR) in Russia. It identifies factors contributing to the problem, including weak processes, outdated regulations, and "local schemes" exploiting insurance disputes. The strategy has two main goals: 1) reduce the total number of lawsuits against AZR, and 2) reduce the total amount of recoveries from AZR. It proposes a multi-level "CASCADE" system including reducing risk segments, minimizing claims management, improving work on received claims and lawsuits, and implementing projects like mediation and voluntary court settlements. Specific tactics are described to achieve the goals, such as banning payments to affiliated companies, introducing employee KPIs,

1. “Trial CASCADE
Strategy”
To legal claims
“Tsunami” flow
reduction
Maxim Petrov, the Legal
Claims Center Director
Moscow, February 2014

2. Legal statistics
2
In 2012 around 320,000 customers filed insurance claims,
total amount of recoveries equaled to 19 bln Rub. During the first half
of 2013 there were 185,500 lawsuits, while recoveries amounted to
11 bln Rub.

3. Combination of negative factors
3
• Two main external negative factors
1. From 2009-2010 the government has become more focused on protecting the interests of
citizens especially in the economic sphere. In particular, the government’s approach to
insurance disputes resolution, where a citizen (consumer) is one of the parties, has changed.
2. The second factor is a lack of uniform methodology for vehicle damage assessment based on
objective criteria.
• Internal problems
The factors mentioned above are combined with such internal problems as manual processes,
weak IT system, outdated regulation, lack of lawyers, etc. You may believe that nothing is
wrong, however there is a high-risk business model, which leads to uncontrolled sale of
OMTPL policies in locations where there are no Insurance agents.
• These conditions together with a high-risk business strategy contributed to spread
such a phenomenon as
«Local schemes» which involve experts, lawyers, police, etc. who deal with collecting insurance
indemnity.
The so called customer protection organizations take advantage of insurance disputes by
redeeming the claims of victims and immediately filing a lawsuit like a conveyor.
Legal claims control &
administration

4. Incoming cases statistics. “Ideal Storm”.
4
2010 – 325 MOD & 2737 OMTPL
2011 – 568 MOD & 4886 OMTPL
2012 – 1850 MOD & 12346 OMTPL
2013 – 3823 MOD & 15103 OMTPL
In response to sales explosion, with loss settlement services lagging
behind, the army of “customer protectors” quickly offered service focused
on the so called “gray” clients. All of the factors mentioned above have
led AZR to the “Ideal Storm” effect. The figures below demonstrate the
results.

5. But! Things are not that bad. It is not like the all-Australian bushfire. It’s
just a series of common local forest fires which happen in Russian
province yearly.
5
We can see heavy smoke from fires as well as the source of fire.
It means that we just need a competent and well equipped fire-brigade
and strong operational support.

6. Strategy. Two possible ways
6
The nature of the problem is not legal. It is understaffing and operational failures on
limited local markets. Therefore
• The two main strategic goals are as follows:
reduce the total number of lawsuits against AZR
reduce the total amount of recoveries from AZR
• The first goal is complicated
It implies the measures to be taken on a company level. It requires changes of a
business model starting from underwriting and proceeding to sales and claims
settlement. We would also need closer cooperation between different business units
in order to reengineer the processes to achieve higher operational efficiency, etc.
• The second goal is to be reached by means of the Legal Claims according to
the Plan below which has been partly fulfilled
This is the first stage of the “CASCADE” trial strategic plan.
The next stage is the accurate response to each claim.
We continue analyzing legal practice and giving feedback to the Claims Centers in order
to improve their service.
Legal claims control &
administration

7. Strategy. Reduction of total number of lawsuits.
7
In order to achieve this goal it is necessary to understand the reasons of
treatment of clients in court. These reasons are as follows:
• failure to agree with the insurance payment amount;
• unjustified refusal to pay insurance (either due to misapplication of insurance
rules or in case insurance policy use is formally correct, but refuted in
practice);
• delaying losses settlement timing by the insurer;
• remote location and inconvenient work schedule of the insurer’s offices;
• uncontrolled OMTPL policies sales in regions;
• aggressive marketing of "avtoyuristy“.
Our opponents are leaving us behind as they are using aggressive
attack strategies.
We have to give up manual handling and start defending in the same
way, but at the same time we need to think how to move on.
administration

8. Strategy. Reduction of total recoveries amount.
8
The main conditions of performing this part of strategy are
staffing levels both in Moscow and regions and operational
efficiency.
2013
2014 Corporate Motor Moscow/St-P. Motor regions
July
August
September
October
November
Reigeneering of the processes, IT modernization targets are set
December
Renewal cooperation interface and reglaments, IT requirements done
January
Fast payment process begins. Design KPI's and new job description
February
Recruitment of lawyers in regions and suboordination to HQ.
March
begin to monitor, control and
blok technical funktions
April
Backlog to be decresed
May
June
In cooperation with Regions and Operational block control
administrate the regoinal legals. Transmit to Operational
Widespread practice of digital legal files management shall be applied in the AZR
Output the strategy "adequate response to each claim"
The trial strategy "CASCAD" shall be extended widespread.
Practice KPI as enviroment indication and motivation
Problem areas
Reorganisation of legal claims
New Head of legal claims on duty
Analysis of the situation (Trasversal Audit, Motor Claims WorkShop)
Optimization of the structure of legal claims

9. The aim of “TRIAL СASСADE” is to reduce total amount of
recoveries. This is a part of Complex multilevel system
“СASСADE”.
9
We have already started to significantly reduce the recoveries amount.

10. «CASCADE» – complex multilevel system of projects and measures aimed
at reducing the number of lawsuits
1st level
Reduction of risk
segment in the portfolio
2nd level
Minimizing claims in
risk segment on the
stage of losses
management
3rd level
Work with claims
received
4th level Work with lawsuits
Project «Mediation»
Project «Global Expertise»
Project «Voluntary Court
Settlement»
Project «ЕСС»
MeasuresProjects
Ban on insurance calculation payments in
the affiliated companies
Ban on OMTPL insurance calculation
payments in regions of concern
Introducing KPI for heads of affiliated
companies
Introducing regulation on making
decisions for refusals with unfavorable
judicial perspective
Encouraging Clients to choose vehicle
service stations - introducing scripts for
employees
Introducing KPI for employees according
to the number and share of vehicle service
stations authorizations

11. One single example: Summary of the audit of 164 court
decisions on motor
11
The Legal Claims Center has audited 164 court decisions on motor insurance
Full amount of legal recovery 54.2 mln Rub
Estimated recovery (without penalty in case of local lawyers acting) 37.5 mln Rub
Revenue that could be saved (just customer protection penalty share) 16.7 mln Rub
Average savings per lawsuit 101,820 Rub
Number of incoming lawsuits on motor in 2013 (registered in IT) 20,300
Local lawyers are necessary to deal with the court office and to appeal to the judge
directly. Acting in only 10% of lawsuits could have reduced legal payments by 150-200
million Rubles in 2013!
These measures will increase administrative workload in the Headquarters but the balance
balance will stay positive anyways.