Over a 12 month period, we reviewed over AUD 20 million in fees across 10 lines of businesses for a major insurer.
Over the three years prior to our involvement the insurer‘s national legal spend had increased by a staggering 90%. While part of this was the result of a marked increase in the number of large quantum litigated claims, the cost of legal fees had nevertheless risen disproportionately when compared with the volume of claims being processed.
We influenced the reversal of this trend, resulting in demonstrable savings.
Our involvement directly reduced legal fees charged to the insurer by more than 6%, translating into annual savings of more than $1,000,000. This is in addition to the ongoing savings now experienced by the insurer in claims advisors not becoming involved in reviews of legal bills and in hidden savings experienced because more appropriate fees are charged in future bills following education of the insurer’s legal service providers as to what is considered reasonable.
A comparison of invoices submitted for payment at the conclusion of a 12 month period with those submitted at the commencement of that period indicate that the bill review program created direct and indirect savings for the insurer of approximately 12% of legal spend, with substantial changes to billing practices ensuring, amongst many other things, greater transparency, more appropriate fee earners being engaged on various tasks, elimination of duplicated entries, billing in compliance with agreed hourly rates and more appropriate time charged for advice work and drafting.
Coupled with the introduction of other changes to legal spend, including reliance on fixed fee costs agreements where appropriate and reduction of panel size, this insurer reported a 20% reduction to their AUD 50 million annual spend, with the costs of creating those savings just a fraction of the AUD 10 million saved annually. Importantly, these savings were achieved whilst also enhancing crucial relationships between claims managers and panel firms, by outsourcing awkward discussions about fee reductions, enabling claims managers and their lawyers to focus on their core business rather than being impacted by discussions on costs.
At the commencement of our engagement with the insurer (the first 4 months) we introduced ourselves to firms on the insurer’s legal panel, established billing guidelines for future accounts submitted for payment, educated relationship managers at each firm about these requirements and about the review process and advised the insurer’s claims managers about their role in the program.
Our fee for this work? Less than 2.5% of legal fees reviewed, with no set up costs.