Irwin Mitchell anticipates good times ahead in shifting legal landscape
12 November 2007
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Irwin Mitchell anticipates good times ahead in shifting legal landscape" />Irwin Mitchell is not averse to change. Under the leadership of senior partner Michael Napier the firm has established itself as a personal injury (PI) powerhouse, carving a path for others to follow. As traditional practices such as referral fees are being forced out, the firm is looking for new ways to reach clients - or should that be customers?
Irwin Mitchell is aiming to become the leading UK supplier of commoditised legal products when the Legal Services Act (LSA) comes into force.
The firm has created an image for itself as a strong advocate for disaster victims' rights, speaking out when the profession comes in for criticism for driving up legal costs and making sure it is seen to be taking on the right causes.
The firm is keen to portray itself as working for the 'man on street', facilitating access to justice. And to some extent it is right to do so.
Napier's reputation as one of the country's leading advocates of victims' rights is well earned. He has been senior partner at Irwin Mitchell for 23 years, is a past president of the Law Society and has held senior posts on the Civil Justice Council.
"Irwin Mitchell is a firm that has politically - and I say that with a small 'p' - positioned itself very well to take advantage of the opportunities coming its way," says one senior legal source.
Pannone founder Rodger Pannone says: "Irwin Mitchell is a firm that's embraced the opportunities before it better than most. It's a good reflection of its strong management team."
Clyde & Co senior partner Michael Payton adds: "There's a consistency at Irwin Mitchell because Michael has been at the helm for so long. The firm has a well-thought-out strategy and it's helped it move up the value chain."
The consistently high level of bulk customer service offered by the firm has won it some high-profile clients. The Automobile Association (AA) and RAC are the latest companies to make use of Irwin Mitchell's law support product. The service gives advice on conveyancing and making wills, as well as access to a legal advice helpline.
Marks & Spencer uses Irwin Mitchell to provide its staff with free legal advice, as do a selection of high street banks.
All the time the firm is broadening its distribution channel in anticipation of the implementation of the LSA. Distribution is king in the commoditised world; getting the product to customer is half the battle. Greater levels of competition will inevitably lead to better customer service, allowing Irwin Mitchell to cash in on the relationships it already has in place.
Those relationships mean that it is well placed to take outside investment when the LSA kicks in. In the insurance world there are already whispers about who might want a stake in Irwin Mitchell.
"It appears that Irwin Mitchell wants to be all things to all people," one commentator says. "It's worked tirelessly to become part of the establishment and that will pay off when the Legal Services Act comes into force."
One rumour doing the rounds is that Norwich Union is looking to take a stake in the firm. Already there is a strong relationship between the two, with Irwin Mitchell supplying Norwich Union subsidiary RAC with commoditised legal advice. The insurer is known to refer cases to Irwin Mitchell and vice-versa, and any tie-up could be valuable for both sides.
Whether Norwich Union would be willing to take on Irwin Mitchells' entire book, however, is another matter. And this is the rub.
If Irwin Mitchell was to link up with an insurer it would have ready access to thousands of cases. Claimants could be contacted directly and offered legal advice for a price, potentially sparking another war for PI cases.
"If it allows an insurer to take a stake in the firm, quite frankly that would be an elevated form of ambulance chasing, which doesn't do anybody any good," a source notes. Buying bulk road traffic accident claims from insurers creates a stream of revenue for Irwin Mitchell. At the moment the firm can claw back the cost of the referral in the success fee. It can also collect the costs of running the case.
Firms such as Irwin Mitchell are receiving and paying upwards of £600 for each case.
"It's always chasing down business," says the source. "It pays quite well for cases and that means it's going to get the bulk."
Which can have its disadvantages on the PR front.
Earlier this year Irwin Mitchell became tainted by association with the British Coal compensation saga. As The Lawyer first revealed in April (17 April), the firm made £12.7m from handling coalminer injury cases for vibration white finger and respiratory disease in 1997 and 1998 respectively.
It was a paltry amount compared with the £106m earned by Thompsons Solicitors or the £97.8m earned by the three-partner PI boutique Beresfords Solicitors. Nevertheless, it was a lucrative income.
"When you have firms picking off the most lucrative cases, it becomes difficult to argue that you're fighting for victims' rights," says a senior legal source.
PI is a sector that has long been plagued with a tarnished reputation. The use of referral fees is a practice that trades on personal misforturne. Many argue that it has also helped to push up the value of cases and led to an escalation in legal fees.
In its crudest form it is another distribution route - one that will be closed off very soon.
"Irwin Mitchell is aware that there's a sea change coming in PI," says one PI partner.
Under the proposed reforms for case track limits, the Ministry of Justice wants to increase the fast-track limit to £25,000, meaning legal costs will become fixed. Claimant lawyers will no longer be able to claw back their referral fees through success fees.
With this lucrative income stream cut off, Irwin Mitchell is looking elsewhere to keep its coffers topped up. That is why Napier is keen to see the alternative business structure system introduced ahead of schedule.
It is clear that Napier would be open to outside investment in the firm. He has urged the Solicitors Regulation Authority to implement swiftly the mechanisms to allow it to take non-solicitor partners.
Cases need to be funded - referral fees were once an effective way of doing this, but the practice has been abused and a replacement is needed. Irwin Mitchell is ready to capitalise on the LSA and it will need to do so quickly to keep its income stream flowing.