Operational and financial administration challenges for law firms in the personal injury and volume insurance space
ARTICLE BY RUSSELL LYONS, DIRECTOR, INNOVATION SOFTWARE
Volume insurance business sounds good. If you are appointed to the panel of an insurance company, you can increase your revenue by millions and move several rungs up the Top 100 list. Your partners will be sharing a much bigger pot, and therefore annual profit share. Clients will come to you, especially if you run advertising campaigns on TV.
At least, that’s the theory. But what’s the reality?
The changes that you will need to make to your business to handle a huge volume of, often, fixed price insurance work are extensive. The jump from administering a few thousand matters a month to often tens of thousands or more requires exceptional managers and continuous review and re-engineering of your business processes to ensure that you undertake such work effectively, but that you also get paid for it on time and without expending a considerable amount of effort in the collections process.
You will run the risk, or worse, actually experience the following:
- The loss of all information to enable you to track and control your time and costs – and therefore profitability
- The loss of ability to determine with accuracy where you should really be sending your bills
- A massive increase in your consumption of working capital due to loss of control over the billing and collections process
- A big increase in slow paying and uncollectible debt
You will need to keep tight control over your case managers and how they use your administrative systems. In addition, you will need strict control over how bills get raised and to whom they are sent. Your case managers and collections team will need to know who the claims handlers are in each of the insurance company clients whose business you handle and have a complete understanding of the accounts payable processes.
Generally, your case management, practice management systems (PMS), and billing systems (plus, where used, document management systems for storing bill documents) can be re-engineered to facilitate the design of efficient processes.
Elite financial management solutions offer some very useful functionality for users who need to be able to raise and split bills so that elements of it are billed to third parties. Many other solutions do not.
In our experience, those firms that will succeed in making money out of this increasingly competitive, not to mention, regulated legal services sector, will be well advised to review their systems regularly and ensure that they are as efficient, lean, and automated as possible as well as include:
- Facility to store details of your clients and claims handler contacts
- Facility to track and process collections in accordance with insurer-specific agreements (e.g. If third party does not pay after three attempts to collect, the outstanding element becomes the responsibility of the insurer)
- Facility to enable bills and bill elements to be grouped by client and claims handler, and workflow processes optimized
- Facility to generate collections e-mails or letters with details of all clients and bill elements payable by the insurer and the insured so that payment can be requested as appropriate together with the facility to drill down instantly to copy bills and retrieve and append copy overdue bills to each e-mail or collections letter automatically
- Facilities to track replies to e-mails sent automatically and initiate workflow with automated routing as appropriate
- Excellent business intelligence on receivables
- Activity-based costing reports that enable you to track and cost the amount of work expended by credit and collections and cost of capital, by client
- Issue and resolution analysis to facilitate the exposure of inefficient operations and administration within your business so that bad practices can be eliminated and best practices promoted
- Integration with CTI and automated dialer systems so that calls required to follow up collections can be made at the optimum time to connect with third party bill payers
- Automated cash allocation software to reduce the amount of time required entering and allocating payments to, very often, bills of identical value
This is not a legal service sector for the faint hearted, as recent big players have discovered.