AIG mulls reverse auction in cost-cutting Emea panel review

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  • Very interesting. We have seen quite an interest from firms wishing to use the reverse auction as a means of negotiating legal services. There is quite a bit of resistance in the market, mostly from the legal firms themselves, which is inevitable. However, reverse auctions are just the negotiation piece. So long as you can accurately define the service levels and quality of the legal team, using CVs/Resumes, robust service terms, perhaps even interviewing the team from each bidding company to ensure their credibility, then price is just the final consideration.

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  • Those defendant firms who have been cheerfully putting the boot into the plaintiff companies are about to get a nasty shock...

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  • The race to the bottom can reduce legal spend, but in many ways it produces perverse incentives.
    Until recently I was at one of the panel firms mentioned above that had a 'volume' defendant team for AIG as well as other well known insurers.
    The agreed rates were so low that it was seriously unprofitable to do anything other than settle the claims at an inflated level.
    Further as the adage goes 'pay peanuts' . . . and the quality of the staff engaged in this work was shocking, with ignorance, inability and error writ large.
    No amount of supervision (at least that affordable within the financial model) can cope with the risks of poorly educated, poorly trained 'case handlers' with a case holding of 180 files.
    Offering a service to insurers in this way may be attractive as a 'loss leader' but the damage to the firm's reputation when it has to write regular cheques for 'leakage' (a nicer new age phrase inferring negligence) can have a seriously corrosive affect on the standing of the firm: why should an insurer send you large loss and catastrophic loss instructions when your firm can't nadle a low value rear end shunt?

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  • Good points anonymous - where did the next step in your career take you?

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  • Not saying where but I'm glad I went.
    But I can say this, the situation in my former firm is far from unique.
    Fees can be as low as £250 per file (and I've even heard that in one contract that's to a hearing including disbursements!) or if the rumours are to be believed in one case <£100.
    I'm sure the claimant community knows which teams at which firms are distinctly Simian and act accordingly; thereby exacerbating the problem.

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