AIG is considering a reverse auction for law firms pitching to win places on part of its legal panel amid a review of its Emea advisers.
The insurance giant has kicked off a revamp of its regional roster expected to result in a reduction in the number of firms appointed and a change to its structure.
A spokesperson for the company confirmed that the reverse auction was under consideration, with its application understood to be confined to non-disease personal injury work.
The procurement style sees the company issuing the tender request bids from firms at a decreasing fee level in a bid to push down prices by encouraging undercutting.
The decision is likely to be related to the increased costs of using the road traffic accident (RTA) claims portal. The Ministry of Justice is set to introduce fixed costs of £800 for all RTA claims worth between £10,000 and £25,000, as well as between £900 and £1,600 for employer and public liability claims (14 March 2013).
In a statement, the insurer said: “AIG Emea has begun a review of the legal services it engages both for corporate and claims work. The objective is to create a more efficient and co-ordinated way of working that meets the requirements of AIG’s operational structure in the Emea region.
“It involves consideration of new ways of engaging with its panel of external lawyers including the reverse auction process. The review is ongoing with completion expected in the summer.”
AIG Emea general counsel Chris Newby, a former Norton Rose associate, started the review early this year, addressing a range of practices covering transactions, litigation and claims.
The Lawyer reported in 2011 that AIG was planning to introduce a panel in Europe, where its business was known at the time as Chartis (24 October 2011). It returned to the AIG brand last year.
It is unclear whether the company took a decision to push the procurement process back from the original plan to launch the panel in 2012, but the latest review is connected to the fact that AIG merged its European and UK businesses in December last year, transforming it into more of a Continent-wide operation.
A City insurance partner commented: “I think there’s inevitably a desire to drive the panel size smaller. It’s implicit in what they said, that they want to get some handle on spend. It’s a long process.
“They do [have a number of sub-panels] at the moment and I think the idea behind this is that there will be a single [panel]. I don’t know what AIG’s thinking is, but certainly all insurers see the idea of leveraging their panel to get as much from the firms as they can.”