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Paul Taylor, national senior partner, Berrymans Lace Mawer
The radical slimming of insurance panels which has recently dominated the news pages of the legal press has come as no surprise to anyone who has been involved in insurance related litigation for more than a few years.
Five years ago, the loss adjuster community was reeling from a similar tightening of the insurance belt, which heralded intense merger activity among loss adjusters, with accelerated consolidation and internal restructuring to reduce costs. Five years on, solicitors are on the end of a similar drive, with panels reducing from over a hundred firms to around 30. This review and rationalisation will continue as insurers clearly believe it reduces cost and improves service. But what effect is this likely to have on the legal sector?
Merger and consolidation for the loss adjusting profession was essential for survival. At the time this was a painful process, but the benefits are now clear. The narrowing of panels has increased the notion of partnership between insurer and loss adjuster and of improving communications. Most importantly, it has enabled loss adjusters to take advantage of economies of scale. I expect the same in the legal sector, although lawyers must anticipate that insurers, having fostered mergers, will then resent the reduction in choice.
The key to survival will be reliable management information, strict adherence to cost reduction targets and accurate budgeting within firms. On the delivery side, speed of response in the handling of claims is likely to be increasingly important as well as the inevitable quality issues.
In future, I also believe that the shrinking of legal panels and more frequent reviews will create more use of lawyers on a long term or fixed-term contract basis, rather than the usual loose, ad hoc way. The profession must be flexible enough to embrace this type of arrangement and imaginative enough to form true commercial partnerships with its clients.
The debate will continue over single office versus national firms, but it is notable that a survey of loss adjusters showed a local base was considered almost as important as cost, particularly with volume claims handling. Personal relationships remain, according to the survey, very important to insurers.
This is the paradox inherent in this competitive world - that personal contacts may become more important. My own belief is that a good relationship with a client will identify and resolve problems more quickly and effectively. That could be invaluable not only if the legal relationship is reviewed yearly, but also if it is to continue creatively and successfully.
Insurers are forcing the legal profession to take a long hard look at itself and the way it works. This will continue over the coming months and years. It will revolutionise working methods to create genuine business relationships between insurers and lawyers. This will be an interesting time, but lawyers who work for insurers will emerge the stronger for it.