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Dec 13, 2009

Insurance Defense Law Firm Strategy

Question: I am a legal administrator with a 14 attorney law firm in the Chicago area. It seems that it is becoming more and more difficult to deal with insurance company clients.While we have always had to deal with low billing rates and unrealistic controls mandated by insurance companies, recent trends have reached levels that threaten the business relationship which has reached an all time low. We must now jump through even more hoops to be able to play in the insurance defense arena. What are your suggestions?

Response: The present state of the insurance defense practice presents numerous challenges to the law firm. These challenges simply cannot be ignored – they will have to be faced head-on. The solutions are complex and will require time to sort through. While solutions can come in different varieties, they will take the form of one of two general strategic approaches.

Reinvent The Practice – Stay In The Game

For many firms the appropriate strategy may be to stay in the game. These will be firms that have a well-established reputation in insurance defense, where insurance defense represents a major source of their revenue, and where adequate leverage and profitability and leverage exist. These firms will not be firms that dabble in insurance work. These firms will be committed to this practice area and will focus on it exclusively. They will be innovative client-market driven firms that blend contemporary approaches with the lessons learned from the founding fathers.

Exit Or Diversify The Practice 

This strategy will be appropriate for firms that desire to get out of insurance defense work entirely or that desire to reduce their dependence on insurance defense work by diversifying the practice. In this way the mix of the practice can be altered. This strategy will not be easy. It will be a rough road and will take time.

Insurance defense attorneys typically do not have the expertise, experience, or the client contacts in other practice areas such as corporate business. Another factor is perceived image. The business community often views insurance defense firms as second rate firms. Often the law firm has in essence branded itself as an insurance defense firm. This can be a difficult obstacle to overcome. Client law firms with whom this author has worked have found that it can take five years or longer to accomplish such objectives.

Specific tactics will depend upon the firm’s size and the amount of insurance defense work in the practice mix. One of the first steps is for insurance defense firms to try to leverage their litigation experience in order to obtain the defense work from self-insured corporations and general corporate representation. In some instances it may be possible to pick up some of the general corporate representation of insurance companies. This will be a tough road.

Larger firms will require some new blood in the firm with expertise, experience, and a book of business in the desired practice areas. This will require insurance defense firms to consider merger or acquisition. Smaller firms may be able to accomplish these objectives completely internally or with lateral partner acquisitions. Both large and small firms should begin extensive programs of continuing education in desired practice areas. Firm and personal marketing plans should place strong emphasis on creating new business relationships as well.

Much work needs to be done by management of insurance defense firms. The process will take time, hard work, and dedication regardless of the strategic options chosen. Now is the time to get started. Click here for an article on the topic.

John W. Olmstead, MBA, Ph.D, CMC

Posted at 09:16 AM in Strategy
Tags: Insurance Defense Law Firm Strategy

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