Insurance companies are cutting down on the number of law firms on their panel, making litigation work increasingly competitive.
Peter Whitehead, partner at James Chapman & Co says: "Insurance companies have historically sent work to a range of law firms, but at the moment they are reducing the number of firms on their panel."
There will be "fewer hands and more control", says Whitehead. He says smaller firms "will be losing out as they won't be as specialised".
Rowe & Maw partner Sean Connolly says: "The trend is for insurers to trim down and consolidate into specialisations, rather than one firm providing everything for a more central control."
He says the trend is bad news for firms not in a niche area. It is a reflection on the emergence of specialist firms and departments, and the fact that clients are becoming more sophisticated.
Belinda Schofield, partner at Cameron McKenna, says: "There is a reduction in insurance claims in professional indemnity, because there is a recognition of fee pressures. The insurers are under pressure to make sure they control the external legal costs."
Schofield adds: "There has been a reluctance to instruct external lawyers unless the issues really cannot be resolved internally. But the larger specialist firms are able to adapt to changes in the market as they have a strong team in the insurance department, both in contentious and non-contentious work."
Michael Paton, partner of Clyde & Co says the changes are in the "focus" of insurance litigation such as financial risk, political risk and contract frustration risk.
Jeremy Hill, partner in the insurance department at Ashurst Morris Crisp, says: "Premium rates at the moment are soft and everybody is chasing business, but the market is a cyclical business and this will provide for a leaner, meaner market."