“I do think it’s a safe thing to say that we’re living in unprecedented times,” says Taylor Smith, president of Suite 200 Solutions, reflecting on the evolving landscape that claims organizations and defense firms find themselves in today, and the environment that they will have to navigate together in the year to come and beyond.
Smith discussed some of the biggest challenges and questions, both internally and externally, facing carriers and chief claims officers—and the firms they rely on to resolve disputes and litigation. Within CLM, claims and litigation management leaders have recognized the importance of getting ahead of—or in many cases catching up to—the monumental issues they face. While progress has been made, Smith outlines exactly what CCOs are up against as they contemplate moving past discussions and toward solutions.
For one, says Smith, “We have a defense attorney staffing crisis the likes of which we’ve never seen.” He remarks that firms are not experiencing a bad downturn, but rather a staffing shortage that has not been seen since insurance defense first got started.
In addition, he says, “We are seeing the industrialization of personal-injury law by the plaintiff bar in ways that we’ve never seen before. And they are just outpacing us at an obscene rate.” Smith was one of the early voices sounding the alarm about EvenUp, a platform serving personal injury lawyers that says its mission is to “close the justice gap” using technology and artificial intelligence. And Smith again outlined the stakes to CLM: “At the very moment that defense teams are recognizing that that the objective of the AI-native plaintiff bar platforms is not efficiency but higher settlement amounts, these platforms are moving into new service areas, like EvenUp’s Pre-litigation As a Service. That’s industrialization .”
Claims professionals today will soon be inundated with artificial intelligence (AI)-generated demands, AI-generated proof packages, and even AI-generated valuations. “This is unprecedented change,” says Smith.
Smith notes Morgan and Morgan’s site injury.com, where a person can respond to simple prompts that ask, “What part of the body was hurt?” And, “What treatment was needed?” From there, data is immediately generated and presented regarding how much money was won in select injury cases. It is further evidence of the industrialization Smith talks about.
Adapting to the Challenges
Amid this landscape, claims departments and defense firms find themselves playing catch-up to plaintiff firms while still trying to figure out the complexities within their relationships with each other. CLM’s Litigation Management Task Force spent the past year having the honest, and sometimes tough, conversations that got to the heart of challenges, both external and internal, facing the industry.
The results of those wide-ranging conversations were outlined in a recently released CLM report. Here, Smith speaks more narrowly to the discussions around carriers’ litigation management guidelines, and how those guidelines may need to change to reflect both modern risks and the current state of the relationships between carriers and their outside counsel. “I think the most forward progress was around recognizing, on the payer side, that many of the existing guidelines don’t match the reality of law firm staffing in today’s environment,” says Smith.
He adds, “To some degree, there’s also a recognition that the focus of the guidelines needs to be on driving outcome and performance, rather than exclusively cost management. So, the processes for reporting critical milestone developments on files is possibly more important than travel cost management in an environment where no one travels anymore.”
Smith says, “Guidelines historically used to be, at a minimum, 50% process and 50% cost control. …Over time, these guidelines, in my view, became 80% cost. I think we are going to see process work its way back in.”
Smith also says the staffing challenges at firms are changing the dynamic as far as how firms perceive and react to carrier demands” “I think we’re now in a position where the leverage is gently shifting from the payer to the provider.”
He explains, “The balance of power has shifted. For many years, carriers have known firms will do what they want them to do” because firms wanted volume from carriers. “Volume was the leverage, and volume isn’t the leverage anymore because the firms can’t take volume. So now it’s a flight to quality; not volume. And that changes things.”
Two Big Things
Smith predicts that guidelines will also need to address emerging industry influences that are moving a rapid pace.
“First and foremost, guidelines will need to address AI utilization across defense firms,” he explains. “Almost no guidelines speak to it today. They don’t ask, ‘Are you using AI?’ or about vetting processes or validating how the AI utilization is being verified and validated. There’s no effort to try and tie together the use of AI with anticipated cost reduction.”
Smith emphasizes that the guidelines should not be prescriptive, but rather evaluative: “I don’t think the carrier has to identify what the process is,” he notes. “They have to be able to understand that the firm has a process, that is appears well reasoned and solid.”
Currently, says Smith, many firms using AI are developing their own “people-process-security” protocols around how the tools are used, but carriers appear hesitant to take an on-the-record stance about the use of AI at the law firms they use. “Many firms that have moved full steam ahead with AI adoption may, in fact, be ahead of carriers in their knowledge of AI safety protocols.” he says.
Smith makes clear that any litigation management guidelines that do not address the use of AI in any way will be inadequate a few years from now.
The second item litigation management guidelines must address going forward is private equity and its growing presence in defense firms. This is a topic Smith addressed at length recently in a CLM Magazine online article. Here, Smith says, “As private equity moves into defense firms, it creates a series of challenges for both the law firm and the carrier because now you have a separate entity that’s running the business operations of the firm.”
Smith says litigation management guidelines will need to address what safeguards are in place on a myriad of topics. “Can the firm ensure that legal decisions at the firm are not being directed from the back office? Does the firm’s MSO (back office) serve multiple defense firms? Can that MSO share data across multiple firms? Can claim histories be shared with other law firms using same MSO? Are platforms the same? Do AI tools share information across that spectrum? Do the private equity investors also hold investments in plaintiff firms? Those are all topics critically important to claim organizations,” says Smith
Smith says that it is important for CCOs to identify the law firms and law firm leaders who are running high AI-adoption firms and engaging in these private equity conversations. “These are the trailblazers in our industry,” says Smith. “CCOs should sit with these trailblazers to better understand the issues, and identify best practices, so as to determine what their own requirements will be. This will give CCOs the footing they will need to direct their other law firm partnerships going forward.”
If there is one overarching theme Smith would emphasize, it is that carriers and firms must face the challenging landscape together. “All of these emerging critical influences affect both constituencies simultaneously,” says Smith. “The industrialization of the personal injury bar, the influx of private equity, staffing challenges on the defense side, the transformative nature of AI – these put our industry at a critical crossroads where we cannot afford to get the big questions wrong.”
To CCOs, he says, “Prepare for the future in collaboration with your best firms; not in a vacuum. Guidelines, payment models, staffing models, AI usage, everything – we will be stronger if we figure these challenges out together.”