“We’re using our advanced models and machine learning to help predict claims that are at risk of attorney involvement and litigation propensity … alerting adjusters or anyone involved in the claim that there’s potential for those risks,” Wilcox said.
The goal is a simple one.
“The key use of the product is to avoid attorney involvement on unrepresented claims, and then claims that have attorney involvement to avoid litigation,” he explained.
Failing to avoid litigation can be expensive, particularly in commercial auto insurance once an attorney gets involved.
“If a claim gets [attorneys] involved from a represented standpoint, you can expect the value of that claim to go up threefold or more in litigation” costs, Wilcox said. “To be able to allow the adjusters to know that there’s things they can do to avoid these situations, that’s what we’re doing.”
Social inflation – rising litigation costs and their impact on insurers’ claim payouts and their bottom lines – continues to be a broad problem for the insurance industry.
Such was the case in 2021, when a Fitch ratings report found that social inflation costs continued to impact insurance, particularly professional lines, with the waning of the initial pandemic leading to more claims in areas including directors and officers insurance and cyber liability.
According to Clara Analytics, the commercial auto sector in particular is facing litigation pressures due to worsening accident severity, a shortage of skilled drivers, more distracted driving and social inflation.
How it works
The company’s tools use data that comes from direct users, along with data from other customers (Clara calls the source a “data lake”) to help derive predictions on a claim.
“We’re using not just their structured data – their integral data elements – but we’re also using unstructured data, such as clean notes and records as well,” Wilcox said.
Clara pitches its product to adjusters and supervisors as something that can help them monitor risks in question and evaluate what’s going on without having to input any data themselves.
“We set up a data feed directly with their claims systems to take data from them, and then we [send] out alerts the next day on what we’ve learned overnight,” Wilcox explained.
The product is essentially designed to identify litigation pain points with detailed, actionable data.
“Let’s say you’re an adjuster and you have an unrepresented injured party. We can alert you before you know it happens that this person has a higher propensity to hire an attorney,” Wilcox said. “That can be based on various factors like demographics of the injured party, where the accident occurred, the type of accident, vehicles involved, type of injury – all those factors go into our prediction, and so we’re able to alert the adjuster as early as possible that this case has a likelihood of attorney involvement.”
Any case could lead to attorneys, Wilcox said, but the data the adjuster receives can explain why and how he or she might change a negative outcome, “whether it’s giving more attention to the injured party or taking different actions regarding the claim.”
The Clara Analytics tool would typically target a claim that an insurer is processing and seeking to manage, Wilcox said.
“The adjuster could either take the action of trying to reach out to the injured party before [he or she seeks an attorney] and create [a] relationship so [he or she feels] comfortable with the adjuster,” Wilcox said. A claims adjuster’s goal might also be an early settlement offer.
While the Clara Analytics tool is designed to present options, it is not intended to tell claims adjusters what to do, Wilcox noted.
“We’re not taking actions away from the adjusters,” Wilcox said. “We’re giving the adjusters essentially a superpower [seeing] into the claims data to [view] what claims they can focus on and take action and change.”
According to Wilcox, Clara’s new tool helps focus particularly on middle-value claims.
“You have your low-end claims that are cheap, and they don’t really make a huge difference, [and then] you have your catastrophic claims that are going to be bad no matter what,” Wilcox said. “It’s those middle ground claims that adjusters can see [where] they can make a difference in real time. That’s where you can really change the trajectory of the claim.”