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$1 billion+ annual legal spend on claims and performance management (AIG)

Bob Peahl, VP Claims Litigation Management of AIG, spoke at ACC’s 2005 Annual Meeting. To set the stage for his talk on law-firm performance management, he stated that in North America, property and casualty claims relied on 2,000 law firms and 34,000 timekeepers. This army, together with 5,000 AIG claims people, handled 100,000 matters and spent more than $1 billion.

Peahl’s group agrees with the law firm handling a claim at least three criteria at the start of the engagement, of which two must be objective measures. The criteria include duration, outcome, guidelines compliance, communication, and cost (See my post of Nov. 14, 2005 on total cost of outcome.), strategic performance, and client satisfaction. AIG weights each criteria and fixes payments to firms based on a formula that takes into account performance against target.