Insurance defense managing partners across the country grapple with common yet critical business development issues, based on our experience.
In the process of helping more than 100 insurance defense law firms de-mystify the panel counsel process, we have observed specific marketing challenges present in this sector. While it is not easy to get on an insurance panel these days, our assistance has enabled many law firms to gain coveted panel counsel appointments.
Listed below are five key lessons we have learned from our work with dozens of law firms in more than 25 states.
- Trend to regional law firms
- Insurance industry consolidation
- Use of staff counsel
- Law firm succession planning
- Metrics management
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Trend to Regional Law Firms
Small to mid-sized, single location law firms are facing increased competition from law firms with a statewide or national presence. While this has long been true in the employment defense sector, it is expanding to property and casualty.
Several managing partners of small firms from California to New York have told us recently of being informed by a litigation panel manager that the law firm is precluded from consideration due to the firm size. This is true even when the small firm is favored and, in fact, may be able to offer more experienced legal counsel at highly competitive rates.
A strategic response to this situation is to try and cultivate new business relationships with smaller or regional carriers, as well as with self-insured entities. Of course, a marketing campaign takes time, determination, and discipline. Some law firms create an in-house marketing committee to take the lead in pursuing new clients. The help of an experienced insurance defense marketing consultant can also accelerate the business development process.
Insurance Industry Consolidation
Market conditions continue to support high levels of merger and acquisition activity, according to a 2017 study by the investment firm Conning.
Recent examples of insurance industry acquisitions include the transactions listed below.
- Fairfax Financial Holdings Ltd. acquired Allied World Assurance Co. Holdings for $4.9 billion in 2017
- SOMPO Holdings Inc. of Japan acquired Endurance for $6.3 billion in 2017
- ACE acquired Chubb for $28.3 billion in cash and stock in 2016
- Tokio Marine Holdings acquired HCC Insurance Holdings for $7.5 billion in 2015
Internal panel counsel consolidation is also taking place. Nationwide is one recent example, which rolled up the panel function for subsidiaries Scottsdale and Harleysville into the parent company. Allianz did the same with its Fireman’s Fund unit in late 2014.
Use of In-House Counsel
Staff counsel programs remains strong, particularly in the high volume, low paying sector of auto defense claims. One national carrier is actively informing inquiring insurance defense law firms that the strength of its extensive staff counsel program is driving an in-depth 2017 evaluation of their use of outside counsel.
In a 2012 ABA article titled, “The Continuing Evolution of Insurance Company Staff Counsel Programs” by Thomas M. McNally, the author reports the following staff counsel trends at insurance companies:
Staff counsel firms are staffed with highly skilled and diverse practitioners who are litigating cases of all levels of severity and complexity in all local, state and federal courts and administrative tribunals.
Some insurance carriers have expanded the use of Staff Counsel to represent their corporate and other commercial insureds in litigation matters involving employment practices, professional liability, directors and officers liability and other specialized areas.
Another change that has contributed to the evolution of Staff Counsel Programs is the increased investment in and use of technology.
Law Firm Succession Planning
Many respected rainmakers in insurance defense law firms are nearing retirement, just as their industry counterparts on the claims side may be doing the same. This generational shift leaves younger partners—many without significant business development experience—scrambling to build their own book of business.
This succession planning challenge is complicated by the fact that long-term panel counsel relationships are being replaced with less personalized vendor selection processes. It is also often difficult (if not impossible) to determine who manages a litigation panel, leaving little opportunity for effective relationship-building.
The insurance defense business model itself can be a deterrent. Few other industries offer a similar revenue stream where a relatively few clients (sometimes even one or two major insurance carrier clients) can generate work for dozens of a law firm’s attorneys on a long-term basis. Of course, this model works well until the big insurance client: a) changes management, b) merges with another firm, or c) moves to a regional law firm model.
This revenue model makes it deceptively easy for a law firm to downplay the need for business development. Law firms that are lulled into this false sense of security can find themselves flat-footed when the need arises to bring in new business quickly.
Insurance carriers approach claims like a business, while their law firm service providers focus on the practice of law as a profession. While this is normal and not necessarily bad or unexpected, it can generate a mismatch in the client-provider equation:
Surprisingly, our experience is that few insurance defense law firms prioritize or track performance metrics. Average time to close a claim and average cost per claim are two very simple metrics that insurance carriers are likely to monitor, for example.
The irony is that the insurance companies, which excel at the application of data analytics using “big data,” tend to know the metrics for any given firm on their panel counsel program as well as all the metrics for all the firms on the panel.
In other words, a law firm that does not know its own metrics is faced with an insurance carrier client that not only knows the metrics for the individual law firm but can also benchmark a law firm’s metrics against competing firms. Ignorance is not bliss.
What Does It All Mean? Never Stop Marketing
The times they are a-changin’, as Bob Dylan wrote. The insurance defense law firms and lawyers that make a determined effort to implement a business development program will greatly improve their likelihood for longer term success. Readers are invited to contact the author to discuss what this might mean for your law firm.
Insurance Defense Marketing Consultant for Law Firms
If your insurance defense law firm is asking how you can get on more insurance panels, give us a call. We have helped more than 100 insurance defense law firms pursue new insurance panel counsel clients.
Legal Expert Connections, Inc. offers three key benefits to insurance defense law firms nationwide:
- We are the leading U.S. legal marketing agency specializing in the insurance defense market. We know the panel counsel process, and can accelerate your business development efforts by identifying who you need to contact.
- Save time and money. You get quality marketing materials and targeted, accurate prospect lists. No need to invest in senior in-house marketing / business development staff with the associated overhead expense for office space, equipment, and benefits.
- Increase revenue with professional, on-going legal marketing campaigns. We do the research to identify insurance panel managers, so you can maximize your opportunity for new panel counsel appointments.