What is going on in the insurance world?

During my time as head of Marketing for Cybersettle, I spent a lot of time analyzing data on the insurance industry, and more specifically, data on insurance bodily injury claims. I used many sources for my market analysis, including a book published by AM Best called Best's Aggregates and Averages. I believe this to be an indispensible source of information for any advanced marketer looking to keep a finger on the pulse of the insurance industry), and sometimes I also reviewed statistics on the Insurance Information Institute's (III) Web site.

The III, arguably a pro insurer Web site, offers data that shows a decline in litigation costs in 2006. This is considerable given inflation, the general trend for increasing settlement values and the III's natural tendency to position litigation data in a light most favorable to carriers. Further, the site explains that they project increases in litigation costs in 2007 & 2008 due to the subprime mortgage debacle. See the following link then come right back...

http://www.iii.org/media/facts/statsbyissue/litigiousness


This is great if your firm handles these types of disputes, but the one trend that is not touched on, is the continual drop in total annual bodily injury claims - the bread and butter for many of you, or the law firm clients you work with. In fact, based on my reviews of AM Best data, overall injury claim volume is currently decreasing by roughly 4%-5% anually. This is considerable and while not everyone will feel this immediately, it is inevitable that this will impact many firms.

Next, this trend is even more dramatic for plaintiff's counsel handling high volume, low severity cases. There are an increasing number of claimants using the Internet to get educated and handling small cases independently. Today, there is no consistent method by which a claimant can accurately evaluate his or her $20,000 or smaller claim, taking into account medicals, lost wages and pain and suffering in a given venue. With systems like Colossus and Claims Outcome Advisor offering evaluation mechanisms for carriers, you can be certain it is only a matter of time before technology will facilitate a claimants' ability to handle their own smaller claims start to finish.

Case in point: when Cybersettle started doing business back in 1998, there were only a handful of non-represened claimant setlements. In 2007, more than 10% of the cases submitted by insurance adjusters were against non-represented claimants. Assuming this trend is representative of the broader industry, as a plaintiff's lawyer handling large volumes of small cases, you are going up against a 5% annual industry claim volume decrease and an unrepresented claimant rate of over 10%+ and it is very difficult to predict how high this figure will get and how fast.

Defense counsel may not be as drastically impacted by the trend in non-represented small claims, but the overall shrinking pool, which includes larger injuries is certainly a major consideration.

Some vendors will be directly impacted, other more indirectly. Companies like Cybersettle handling large volumes of small claims will be affected by the industry reduction trend. Financial services companies marketing services to claimants through their attorneys may see a reduced opportunity for this. Overall competition will increase and profit margins for firms will shrink, and unless firms can adapt and find ways to reduce costs and become more competitive, discretionary firm spending will be impacted and many vendors will be affected by this.

In my next post, I will discuss in greater detail what I know about claim evaluation systems like Colossus and Claims Outcome Advisor, and the newer Precedent ID and how these have impacted the way personal and commercial carriers do business. This is very interesting stuff - be sure not to miss it.

Today's marketing tip: Marketing is so much more than communicating your offering to clients and prospects - marketing touches all facets of your business. A sound marketing strategy must incorporate understanding the big picture in your industry, through the accumulation of comprehensive business intelligence that gives you greater foresight and keeps you a step ahead of the competition.