Marketing and business development campaigns are often a low priority at many insurance defense law firms. The day-to-day demands of an insurance defense caseload come first, as they should. The risk, however, is that the managing partner and other shareholders never find sufficient time to devote to identifying and cultivating new accounts.
Insurance defense is about assessing and minimizing risk of all types. Here are seven risk factors that insurance defense law firms may want to reconsider when prioritizing the need to invest in marketing and business development.
1. Insurance carriers are consolidating, which is ultimately resulting in fewer panel positions. Hartford and Navigators is the latest example, preceded by Ace and Chubb, Liberty Mutual and IronShore, Western World and Validus, which was followed by AIG’s acquisition of Western World.
One of the key benefits anticipated in any merger of similar organizations is the “synergy” found in combining overlapping functions, one of which is likely to be the management of outside counsel.
How many law firms does one insurance company need? Many carriers are answering this by saying “less than we have now.” After a review of outside panels, some decisions are made as to which firms to keep and which to release. Even good firms can be cut when hard business decisions need to be made.
2. Litigation automation tools are cutting out billable hours. Walmart, for example, announced in April 2018 that it is using artificial intelligence software from LegalMation to automate lawsuit responses and the drafting of initial discovery requests. The giant retailer estimates that what previously took a law firm six to ten hours of billable time can now be done in less than two minutes. While this remains in an early testing stage, a national rollout is planned at some point in the future.
3. Insurance carriers are embracing regional law firms. Single location law firms are finding it more difficult to compete against in-state firms that offer insurance companies the perceived benefit of multiple locations. Reduced travel time is a major selling point used by firms with multiple locations, as well as localized knowledge of the judiciary, plaintiff’s bar, and jury pool.
4. Big law firms are moving into smaller markets. As it gets more difficult for law firms of all sizes to attract new clients, some larger firms are venturing into smaller territories that they previously avoided. Smaller insurance defense firms find themselves competing against larger firms with extensive in-house marketing resources.
5. National law firms are tying up relationships with carriers. This is most commonly seen in employment defense for employment practices liability insurance (EPLI) panels and claims. The top six U.S. employment defense law firms collectively have 280 offices and 4,550 attorneys! (It’s no wonder we hear from smaller employment defense law firms or practice groups around the country that are finding it increasingly difficult to compete or get on an EPLI panel.)
6. More law firms are crossing state lines to expand into multiple states, often by acquiring an existing firm. Many insurance defense law firms are following major clients into new geographic territories. In other cases, an aggressive law firm strategically starts to open small satellite offices in neighboring states. Once the small office is up and running, the law firm seeks new business from current clients as well as local clients in the new location.
7. Expanded use of litigation metrics. The irony of the insurance defense market is that litigation managers at P&C insurance carriers often know a law firm’s metrics for case management statistics like average time to close a case or average cost of a case, but individual insurance defense law firms generally are not keeping their own score. This is an obvious competitive disadvantage that is likely to harm the standing of a law firm that can’t measure or manage its own numbers.
How Much Should a Law Firm Spend on Marketing?
BTI Consulting reported in November 2017 that 2018 law firm marketing budgets are increasing. “The typical law firm will spend 2.53% of firm revenue on marketing and business development, up from 2.5% of revenue in 2017.”
Looking at a mid-sized insurance defense law firm with 30 attorneys, let’s estimate that the annual revenue is approximately $8 to $10 million (probably conservative). Applying the 2.53% estimate above, the marketing budget would be in the range of $202,400 to $253,000.
Viewed from a different perspective, the average marketing and business development budget, excluding staffing, for a law firm with 2-99 attorneys is $505,769, according to a March 2017 report issued by Bloomberg Law and the Legal Marketing Association. On average, a law firm has one marketing professional for every 25 attorneys.
In the author’s experience, many insurance defense law firms do not come close to this level of marketing investment. Marketing to current clients, at a minimum, should be a priority at all law firms in order to protect the existing revenue base.
Insurance Defense Marketing Consultant for Law Firms
If your insurance defense law firm is asking how you can attract new clients, retain existing clients, or get on more insurance panels, give us a call. We have helped more than 150 insurance defense law firms pursue new insurance panel counsel clients.
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- Increase revenue with professional, Bar-compliant legal marketing campaigns. We do the research to identify insurance panel managers, so you can focus your time on the business development process.