In an industry that is built on the calculus of risk, are we calculating risk correctly?
The lack of reliable data contrasts sharply with the approach of an industry that relies so heavily on statistical analyses and actuarial studies. With all the industry discussion about the importance of big data, where are the statistics to confirm the litigation explosion, the runaway verdicts, or the increase in litigation expense? If we only measure defense costs and do nothing to obtain an accurate evaluation of claims exposure, then do we continue to assume that defense costs are the crux of the problem?
In this month's issue of CLM Magazine, we ask whether a statistics-oriented industry must set reserves and settle cases on the basis of fear rather than fact.
Are we evaluating cases as jurors would? Or are we settling cases and setting reserves based on a fear of what they might do?