CLM Advisors’ “Snapshot” is Interesting Picture on Use of Third-Party Legal Bill Review Vendors

CLM Advisors periodically conducts informal surveys of industry executives to capture how industry executives feel about different litigation and claim strategies. These results of these informal CLM Advisors surveys are compiled into a “snapshot.” Unlike CLM Advisors more formal in-depth “studies,” snapshots are intended to be more informal, point-in-time, “State of the Unions” on particular important aspects of the insurance industry.

With an end view of compiling a snapshot on the state of the use or non-use of third-party legal bill review (LBR) vendors in the insurance industry, CLM Advisors recently surveyed some 125 senior litigation and claims officers. The results of this survey presented an interesting picture on the “State of the Union” on the use of third-party legal bill review vendors in the industry.

But before getting into this Statue of the Union, a brief review of the history of the third-party legal bill review industry may be in order.

Third-party LBR services first gained real traction in the late 1980s and early 1990s. Software-driven e-billing solutions began to be deployed in the late 1990s and early 2000s. Now, according to some estimates, those two industries combined account for a market of roughly half a billion dollars.

As noted, the snapshot results presented an interesting picture on the use or non-use of third-party LBR vendors. A survey question with regard to why third-party LBR vendors are not used evoked familiar responses including:

  • concern about relationship disruption with partner law firms
  • lack of expertise in types of litigation for which they are auditing bills
  • not ultimately convinced of their value

Based upon my own experience, the first response – the fear of alienating an insurer’s law firms – is the more frequent response I have been given over the years for why insurers are reluctant to use a third-party LBR vendor. But as I tell those doubters, if their panel counsel is doing work for other insurers – including their competitors – the chances are pretty good that the firms’ legal bills are being audited third-party LBR vendors.

But I think the best argument that can be made to all the objections or concerns about using third-party LBR vendors can be found in one particular survey question to insurers that use third-party LBR vendors. When asked to rank their overall satisfaction on a 1 to 10 scale with 10 being “extremely satisfied,” the median response was an 8 which would be considered as being “very satisfied.”

It would be counterintuitive to believe that insurers who are “very satisfied” with using third-party LBR vendors also would have relationship problems with the panel counsel or were not convinced of the value of third-party LBR vendors. And while there were some individual issues identified in the survey that related to service and quality of individual third-party LBR vendors used by some insurers, the results of the survey nevertheless tended to show that insurers that used third-party LBR vendors believed they received value and were overall satisfied with the results.

Of course, those who do not use third-party LBR vendors are convinced that their use of an internal LBR unit or just having their own adjusters do the legal bill reviews is effective. But I would question as to how they can know this if they have never had their internal or third-party LBR program independently evaluated for effectiveness. Without such independent evaluation, I am reminded of the adage, “you don’t know what you don’t know.”

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Because of its expertise and thorough knowledge of litigation management and legal bill review practices throughout the industry, CLM Advisors is in a unique position to assist insurers in evaluating the effectiveness of established LBR units or in helping an insurer decide whether establishing an internal LBR unit or using a third-party LBR vendor is the correct decision. If you would like information on CLM Advisors “Develop or Assess a Centralized Legal Bill Review Unit (LBRU)” or “Third-Party Legal Bill Review (LBR) Vendor Management Assessment” programs, please contact me at john.conlon@clmadvisors.org. 

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