The New Normal in Claims Management: Random No Longer Rules: Premonition Analytics and the New Normal in Claims Management.

• Position: [GUEST OPINION]

In just a few short years, big data and analytics have fundamentally shifted the way claims departments litigate claims. How are these technologies changing how experts assess risk in the courtroom?

In the movies, plucky heroes are forever setting off to solicit the aid of mysterious wizards. Muttering arcane language and appealing to strange powers no mere mortal could hope to understand, the magician makes the situation either better or worse, taking the end result out of the hands of the poor sods who asked for their assistance.

Until recently, a claims professional probably experienced a similar mixture of hope and helplessness. Lawyers are often seen as the keepers of "secret knowledge:' Yet numerous studies have shown them to be little better than random at predicting the outcome of a given case. The outcome of cases worth millions, too, often come down to a coin toss.

Today, it's common practice for claims managers to consult data scientists as part of their risk assessment process. Litigation analytics firms help insurers determine when it's most practical to settle a claim or to proceed to court by identifying red flags based on historical trends. It's telling that few managers will even hire a lawyer without knowing their courtroom win/loss record; a metric that would've been virtually impossible to verify even five years ago.

So, how did we get here? And why?

Moneyball for Law

The science of predictive analytics comes down to isolating reliable bellwether metrics within a given data set. If you can find a factor that is regularly correlated with a given outcome, whether or not you understand why that correlation exists, you're on your way to cracking the code.

For many years, the $437 billion USD legal services sector was one of the few holdouts in a marketplace that has otherwise been thoroughly disrupted by data-driven efficiencies, price-matching tools and online reviews. Litigation was thought to have too many variables for effective predictive modeling, but a few firms, like Bloomberg, LexisNexis and Thompson Reuters, questioned the conventional wisdom and began to develop products.

Legal analytics researchers eventually isolated the following key predictors for case outcomes:

* Jurisdiction/Court Location

* Case Type

* Attorney Win/Loss Record

* Attorney-Judge Relationship

What they found was that, while the particulars of each case indeed varied widely, the...