Reining in runaway legal costs: Allegient Systems

When Ontario’s harmonized tax kicks in on July 1, 2010, insurance companies doing business in that province will be hit with an additional 8% for legal costs. Legal fees are currently subject only to the 5% federal goods and services tax. But harmonization will combine the provincial sales tax with the federal GST to create a single rate of 13% � and plenty of headaches for insurance companies already struggling to monitor and control the costs of legal counsel.

And that’s where Allegient Systems, a Toronto-based bill-review technology firm now celebrating its 20th anniversary, comes in. Allegient’s web-based Legal Expense and Performance Management Suite has saved insurers hundreds of millions of dollars by identifying discrepancies and exceptions in legal invoices. “The system is designed to detect any sort of billing anomalies, any exceptions to an insurer’s litigation guidelines,” explains Gary Stammers, Allegient’s director of operations, Canada.

Here’s how it works. The insurer provides its guidelines to Allegient, and after consultation, those guidelines are translated into system rules. The legal firms submit their bills electronically, through an Internet portal, directly to the insurer. But before the invoice reaches the claims department, it passes through a rules engine that applies the guidelines. The software tags discrepancies automatically and refers the bill back to the law firm for correction. This ensures that, when the final bill reaches the claims manager, it has already been scrutinized for guideline compliance, and the manager can review bills faster and more efficiently. “The manager can decide at that time whether or not he or she agrees with the exceptions,” says Stammers. “So essentially, the system is a tool that takes away the requirement of the person reviewing the invoice to memorize every last guideline, without taking away the ability of the reviewer to make decisions on any violations of the guidelines.”

The system also tracks all the data relating to the invoices, allowing companies to identify trends, compare costs among various vendors, and estimate expenses. “We use the data to help inform our staff on how they should be reserving their files, using sort of an aggregate average,” says Troy Bourassa, claims manager at CAA Insurance. “That’s a lot better than just guessing what the expense may be.”

CAA Insurance has been using the Allegient system for about four years. According to Bourassa, the company reaps significant savings from an ever-increasing percentage of clean bills being submitted the first time. Upon implementing the system, CAA Insurance had face-to-face discussions with all its counsel to explain its billing guidelines and intentions. “If you make it very visible and transparent to vendors what they can and can’t do, then the tendency is to submit clean bills in the first place,” he says. “The system itself and the structure promotes entering clean bills.”

Because insurers pay for the system on a transactional basis, there are no upfront fees. While return on investment varies depending on how an insurer chooses to use the system, many companies have realized a return of 6:1 � a savings of $6 for every dollar spent. Still others have demonstrated savings of 8-10% of the invoice value.

That’s welcome relief from the pain of rising litigation costs.

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This is the first in a series of articles. Stay tuned for our next instalment � how to save big bucks on your independent adjuster billings.

About Allegient Systems

For more than 15 years Allegient Systems has been both the pioneer and leader in providing legal expense and performance management systems and services that maximize the potential and the profitability of professional legal service relationships between law firms and claims organizations. Allegient is the acknowledged market leader in providing vendor management, e-billing and bill review solutions to the insurance industry. With over 50 insurers using the Allegient System to process more than a billion dollars in vendor bills each year, the company continues to experience year over year double digit growth in sales through a disciplined focus on customer service backed by a wealth of insurance industry expertise.

Allegient�s web based offering delivers collaboration, efficiency and productivity to the litigation management process by using electronic invoicing, online bill review, budgeting, workflow management and a sophisticated rules engine. Allegient�s Business Intelligence capabilities � using Oracle/Hyperion-based query and analytics tools – allow users to access, analyze and share data for the purpose of improving litigation expense, performance and outcome.

Allegient is headquartered in Wilton, CT and has sales and support facilities in Chicago, IL and Toronto, ON. For additional information, please visit