This is the third installment of a series detailing the five disciplines at the core of an effective data metrics program for claims litigation organizations.
The first two articles in this series focused on the importance of a good metrics program to claims organizations and how to generate rich and reliable data.
In this entry, I will describe how to effectively use that rich and reliable data by strategically segmenting it.
What is data segmentation?
To effectively use the information that you have gathered, you must be able to divide it into chunks that help you meaningfully analyze the data. For example, lawsuits involving auto property damage are not the same as wrongful death nursing home cases, and so they are naturally handled differently, with costs and losses likely evaluated in different ways. Dividing, or segmenting, report data into these categories supports strategic decisions tailored to those specific claim types.
This is just one example of the usefulness of segmentation. There are three key types that should be included in any metrics program: claims segmentation, invoice segmentation, and time segmentation. Each type has specific benefits and helps provide insight in different ways.
Segmenting by claim information
Segmenting data by claims can reveal the drivers of results at a high or granular level, depending on how many categories of claim-related information are applied. For example, all claims can be segmented and sub-segmented by claim status (open or closed), claim type (auto personal injury, malpractice, etc), jurisdiction, etc.
Segmenting reports only at a very high level by a category such as "claim type" is generally useful for senior managers seeking high-level understanding of the overall status of the litigation program. Claims and litigation managers, meanwhile, must have access to information segmented at increasingly granular levels in order to identify which claims are driving results and why.
Business Intelligence (BI) allows for the easy creation of both high-level and granular reports that analyze large amounts of data and present it in easily-understood formats. These reports become the life blood of high-performing claims organizations.
Segmenting by invoice information
E-billing captures all activity on a claim, making the claim's history and costs entirely transparent when analyzed. As a result, BI tools can be used to build reports that show which factors have significant impact on legal spend and outcomes. More importantly, this information is actionable.
As an example, if costs are increasing on a group of claims, invoice information such as tasks and activities, billable hours charged, and rate details expose the reasons why costs are rising. A report that segments claims by over- and under-budget status can be analyzed to identify who billed on over-budget claims, how often, for what activities, and at what rate. Managers can then identify the root cause of the results and take the necessary actions with their outside counsel and internal personnel to more closely manage firms and problem claims.
Segmenting by time
The final type of segmentation I'll discuss, time segmentation, shows how a group of claims changed over a period of time, illuminating trends that you may want to encourage or change. Segmenting information this way shows changes to average case age, cost per claim, and outcomes over time. Year-over-year, quarter-over-quarter, or even shorter period comparisons are most useful for:
- Identifying emerging trends surrounding a segment of claims.
- Evaluating performance against a goal.
- Driving a strategy over time.
The underlying reason for any litigation metrics effort is to gather data that can inform good decision making and support the company's business goals. Understanding the drivers that various kinds of data segmentation reveal is central to uncovering this actionable information. In the final installment of this series I will detail the types of reports in which you can put data segmentation to work and get the key insights that fuel a great litigation program.
As director of decision support services at Wolters Kluwer's ELM Solutions, Bill Sowinski leads an expert team in the design of legal spend analyses and benchmarking disciplines. He works with clients to structure and evaluate their legal data, helping to develop and deploy strategies that improve legal and claims department performance. Email him at Bill.Sowinski@wolterskluwer.com.
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