How cost-effective are fixed fees? – Allegient Systems

In an effort to cut costs, many insurers are turning to alternative-fee arrangements for aspects of their independent-adjusting and legal-defence work. These agreements may include flat fee, fixed fee, bundled fees – whatever the terms, they are a departure from the traditional time-and-expense billing. Insurers maintain that these types of arrangements help them control their costs, but how do they really know if they are as cost-effective as if the work had been billed at an hourly rate? As the adage goes, “If you can’t measure it, you can’t manage it.” In other words, if you don’t know what was done by whom to resolve the claim, how will you know whether or not the alternative arrangement is better?

There are many factors that go into settling a claim. In the case of fixed fees for telephone adjusting, for example, the insurer has no detailed information about the claim. Such as: Who worked on it – a junior or senior adjuster? How much time did it take to resolve – one phone call or several? Are these claims closing faster, and if so, is that also affecting the settlement amounts? And most importantly, how does the invoice compare with the amount that would have been paid had the work been billed at an hourly rate?

Allegient Systems, a Toronto-based bill-review technology firm, can provide the answer to these questions and more. The company’s Expense and Performance Management Suite captures all that information within the invoice, and can extract it as needed. “The law firm or the IA vendor includes that information on their invoice,” says Gary Stammers, Allegient’s director of operations, Canada. “So they’re not just submitting a one-line item on the invoice saying ‘flat fee’ or ‘fixed fee.’ They’re also including all the activities, as well as the expenses or disbursements associated with the claim.”

The system will also ensure that the vendor is billing at the agreed-upon fixed-fee rate for the specific activity – especially helpful for companies that have multiple arrangements. In addition, by tracking all the data relating to the invoices, it can identify payment trends for various activities, so insurers can determine if the agreed-upon amount is fair for both parties.

But the main benefit, according to one Allegient client, is the ability of the insurer to assess the effectiveness of the project by comparing the amount billed through the fixed fee with the amount that would have been billed by an hourly rate. The client also cites the system’s capability to track information about cycle times, indemnity payments, etc., adding that he can now compare those results with other non-alternative fee files.

“We’re providing the metrics, information, and data that will help insurers assess the effectiveness of these programs – whether or not they’re charging the right fee, and whether or not they’re getting their desired result from this type of a program,” says Stammers. “The system actually works out what would have been the hourly rate that would have been billed had this not been a fixed-fee case or claim,” he adds. “We’re capturing the effort, the time, and the going rate by the individual or individuals related to the case, had they been billing just a straight time-and-expense charge.”

And speaking of fees, because insurers pay for the Allegient system on a transactional basis, there are no upfront charges, and it generally pays for itself through the cost savings realized. Now that’s a fee arrangement that’s sure to appeal to every insurer!

For more information, visit This is the second in a series of articles – stay tuned for our next instalment. For more information on how the Allegient System works, visit our first article, “Reining in Runaway Legal Costs.” View first article here.

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