Lanzko Insights
Practical notes on claims innovation and AI trends—built for claims leaders.
How TPAs can succeed in claims operations through auditable matter controls.
In 2026: The Evolving Landscape of Insurance Claims Operations
In 2026, the landscape of insurance claims operations is evolving rapidly under the pressure of rising legal expenses and regulatory scrutiny. Billing rules, traditionally focused on invoice review, no longer suffice for Third-Party Administrators (TPAs) entrusted with managing claims. The demand has shifted towards robust, auditable matter controls that provide transparency, justify legal spend, and mitigate risks. This article delves into the necessity of these controls and outlines strategies for TPAs to meet heightened industry and regulatory expectations.
The Problem
Reliance on billing rules that merely audit invoices exposes TPAs to increased scrutiny from insurers and regulators. Such systems fail to account for the detailed tracking of matter strategies, budgets, and outcomes, which are vital for addressing legal spend scrutiny. This oversight leads to significant operational issues, such as disputes over defense counsel billing and potential malpractice claims against panel counsel. Without granular visibility into legal activities, carriers struggle to determine if the spend is appropriate for the case value, often leading to increased costs, cycle time delays, and oversight failures. These problems arise in environments governed by stringent regulations like No Fault and ERISA, underscoring the need for a shift towards matter-centric systems for defensibility and cost control. [Source: LA Times].
Why It Persists
The persistence of inadequate billing rules as a stand-in for litigation management is a result of entrenched system dynamics, including the fragmentation of insurance operations. TPAs typically lack integrated systems for matter-level controls, leading to reliance on post-hoc invoice audits instead of preventive management practices. Regulatory environments add complexity, necessitating auditable controls that are often overlooked due to the prioritization of short-term cost containment over comprehensive spend oversight. Behavioral tendencies favoring familiar invoice reviews, coupled with complicated compliance requirements, exacerbate these issues, further amplified by misaligned incentives among TPAs, carriers, and legal teams. [Source: CLM].
The Enabling Approach
To address these challenges, TPAs need to pivot from reactive invoice reviews to employing rules-based matter controls. Key principles include leveraging automation to enforce compliance with matter-specific deadlines and thresholds, ensuring transparent and auditable tracking of legal actions. Decision frameworks should prioritize risk-based assessments and ROI analyses to justify the investment in matter controls. Practical steps involve deploying docketing and billing software that flags anomalies, defining matter budgets with clear thresholds, and establishing regular audit cycles to maintain oversight and compliance. Training TPAs to adhere to these controls is crucial for managing legal spend effectively. [Source: LeanLaw].
Practical Example
Consider a law firm that handles significant liability claims. Before implementing matter-level controls, the firm struggled with unanticipated legal spend and misaligned billing, resulting in client dissatisfaction and increased premium costs. By adopting a matter-level spend management platform, they were able to track expenses in real-time, flag unusual charges, and provide detailed reports to clients, enhancing transparency and compliance. This transformation allowed the firm to negotiate better insurance terms and significantly reduce overspending, demonstrating the impact of matter controls in aligning operations with regulatory demands. [Source: MyCase].
Governance and Risk
Implementing matter-level controls introduces potential risks, such as automation inconsistencies leading to disputes over allocations. To mitigate these risks, TPAs must establish robust controls, ensuring human oversight at critical points. This involves setting pre-defined matter budgets, using standardized models for cost allocations, and integrating compliance checks into operational workflows. AI tools can assist in monitoring, but human intervention is essential to validly address anomalies and approve significant deviations. Regular audits, supported by immutable logs and KPI monitoring, ensure ongoing compliance and risk management. [Source: Davies Group].
The Takeaway
Adopting auditable matter controls over simple billing rules is crucial for TPAs aiming to manage legal spend amidst heightened scrutiny. Key actions include:
Automating compliance with matter-specific regulations.
Establishing robust auditing practices for continuous improvement.
Investing in training and technology that supports transparent accounting.
If you only implement one change, enhance your current systems with advanced matter management capabilities to ensure defensibility and cost efficiency.
Keywords
legal spend management, claims operations, auditable controls, insurance litigation, TPAs, matter management, regulatory compliance, billing systems, automated auditing, risk mitigation, claims auditing, financial oversight, compliance integration, governance frameworks, AI in insurance