Case study: The virtual lawyer cutting costs at AXA

How can you really add value for clients? By taking away the need to instruct lawyers.

The stark reality is that clients regard the instruction of their own lawyers as a distress purchase and, according to Kennedys head of liability and innovation Richard West, it is far more likely that they do not want to instruct lawyers at all. Furthermore, some clients are beginning to regard legal as a product rather than a professional service, albeit a product to be professionally delivered.

Some clients are beginning to see legal as a product rather than a professional service, albeit a product to be professionally delivered

As a result, Kennedys began to consider how it might work with clients to reduce legal spend and, in the right circumstances, clients’ indemnity spend.

Additionally, the introduction of Government-driven online claims portals and medical reporting criteria for the vast majority of personal injury cases has forced a reduction in the proportion of those claims heading into litigation. The task at hand: to make clients less reliant on their lawyers and encourage greater self-sufficiency.

Scoping the market

The insurance sector is known for tight margins. In areas such as motor insurance insurers are challenged to make a profit so indemnity spend, including legal defence costs, greatly impacts the client’s bottom line.

KLAiM, a package that Kennedys dubs a ‘virtual defence lawyer’, was designed to assist insurers and organisations managing insurance claims in-house, targeting motor liability small claims and fast-track matters where primary liability is not in question, although the scope of the product has been substantially extended since its initial spec.

The project began some eight years ago. The lightbulb moment was realising that technology could help reduce client spend for the multitude of client cases that require minimal legal expertise. Many of these only involve cost disputes, with litigated claims settled at an early stage. Often, very little legal input is required to file an acknowledgement of service, enter a standard defence and reach the directions stage for claim settlement.

West worked with partner Jennifer Harris and project manager Ade Walker to map out a series of simple steps that would allow a claims handler with no legal training to manage more of the process themselves. They then chose a client, TCL, with whom the firm already had a relationship, to test and validate their ideas and, as they began to build the system, prototype it with them. With minimal investment and rudimentary technical knowledge the project began to take shape, inadvertently adopting a ‘lean’ approach to product development.

The aims of the project were:

• a streamlined and automated online process
• an extension of time for claims settlement, reducing indemnity spend and ensuring claims teams retain control of the claims process for longer, and in far more cases
• a guaranteed reduction in legal spend
• a reduction in overall insurance indemnity spend for compensators and their customers, and
• an ability for the compensator to better retain business and maintain their margin as a result of reduced indemnity spend.

The product itself was always conceived as an entirely web-based offering, hosted within Kennedys’ own data centre, and has been developed entirely in-house. It was designed with an underlying framework that models the court process. The system captures core data about a claim and creates a series of scheduled tasks for the claims handler to complete while automatically generating all necessary court documents and letters for key stakeholders.

The product was conceived as an web-based offering, with an underlying framework that models the court process

“Insurance disputes like this are typically fielded by law firms that manage them on a fixed fee of around £500-plus per claim, or £80-160-plus per hour. The output of the project led to immediate savings.

The volume of claims for motor accidents is high – for some insurers there can be tens of thousands of cases – so the associated legal fees accumulate and form a significant part of an insurer’s or compensator’s indemnity spend. AXA, for example, receives approximately 50,000 claim notification forms every year, around 7 per cent of the total road traffic accident portal volume. A workflow has now been built that will see KLAiM used for highways’ and employers’ claims, public and occupiers’ liability matters, infant approval cases and in the MOJ Stage 3 portal process.

AXA adopted the project with a view to reducing spend. Working closely with Nick Hilton, head of technical motor claims, and Colin Burgess, motor claims strategy consultant at the insurer, Kennedys maintained regular dialogue regarding market developments and AXA’s strategy.

The insurer’s initial impetus to begin working with the tool linked into a change in AXA’s strategy on low-value injury cases.

How the project changed

All clients require KLAiM to be configured in a particular way, so it has to be flexible enough to cope with different approaches. At its heart, the tool needs the details of a claim or case to be captured, typically involving stakeholder details, key dates and references. The system then prompts the claims handler to generate a variety of court documents and letters according to the rules of the protocol being followed.

As part of the deployment process a manager will work with the client to document and then implement system configurations. For AXA, this can involve not insubstantial changes to the data the firm captures, as well as a requirement for the firm to align with the client’s own security and authentication practices. For example, AXA has strict rules in accordance with relevant data protection regulations and KLAiM had to be approved by the company’s IT security team.

Clients will have specific password requirements; they may need access only within their own premises and have requirements to reset passwords on a regular basis. The service also has to take account of client-by-client adjustments to the letters the system produces, to align the product with in-house objectives and strategies.

As the project has developed and the number of claims handlers with which the system is deployed has grown, reporting mechanisms have had to evolve.

We can analyse the data provided by counsel on each case to assess the success or failure of our approach”

Colin Burgess, AXA

“Kennedys sought our feedback on monthly reporting and we made some changes to manage the work,” says AXA’s Burgess. “One example is developing an exception report on cases where a defence has been issued using KLAiM but no hearing date has been entered. This allows us to track cases and make further enquiries of the court to ensure we’re aware of all hearings and have appropriate representation arranged.

“We’re also able to analyse the data provided by counsel on each case to assess the success or failure of our approach and identify particular training needs for individual handlers.”

Detailed reporting can now be provided on the number of claims that reach a particular stage in the process. This, in turn, helps clients adjust their strategies.

Through working collaboratively, AXA has played its part in accelerating implementation of the innovation.

“As with any change, it’s crucial that you bring your people with you,” says Burgess. “At a very early stage we involved the end-users to ensure it worked for them, and made modifications prior to launch. We also arranged demonstrations of the system to all staff to ensure they knew what was coming and that it was nothing to be afraid of.”

Outcomes strong for insurer users

The objective was for insurers to be able to control and reduce their legal defence costs through a proprietary workflow and avoid solicitor defence fees entirely in the MOJ Stage 3 area.

According to data from Kennedys, outcomes have been strong across the pool of insurer users:

• At least 75 per cent of the litigated cases entered into KLAiM are handled by the client without any need to instruct a lawyer
• Up to 75 per cent of cases managed via KLAiM settled successfully
• Use of the tool has delivered a total saving of around £400,000 in legal costs to clients in the past year, with an expectation of multiple millions in future years

For AXA, one of the advantages of the project is that it allows the individual claim handler to retain control of their case and see it through to the end. This empowers the handler and is seen as being good for employee engagement.

Developing an enterprise app requires a different skillset from traditional legal services, and the result has delivered value for our clients on an unprecedented scale”

Karim Derrick, Kennedys

As far as a wider rollout is concerned, in recent months Kennedys has invested in a team of developers and managers dedicated to ensuring the tool remains robust and scalable as its application increases. As the product has gained traction, the potential for applications in other parts of the business has become clear. Several initiatives are in the pipeline.

“The business has come a long way, both technically and commercially, through the development of KLAiM,” says Kennedys head of research and development Karim Derrick.

Bringing in expertise from outside legal services to help shape this development has also been of benefit to the wider firm, he notes. “Developing a successful enterprise software application requires a different structure and skillset from traditional legal services, and the result has delivered value and savings for our clients on an unprecedented scale.”

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