A Start-up System – Is It Time to Change It
Expanding Into Insurance Defense
As law firms look for additional sources of revenue some have given thought to taking on insurance defense work. In all honesty I have more firms asking how to diversify out of insurance defense into more self-insured and direct representation work. Law firms that want to pursue insurance defense will need to become part of the club and do more than just dabble in this area. They will have to get on the “approved panel lists” of the various insurance companies. Once firms are on these panel lists they will have to entice claims manager to use them as opposed to other law firms that are on their approved lists. In other words they will have to establish relationships with numerous claims managers throughout the company. This is harder than it used to be due to policies that many companies now have prohibiting various forms of networking such as dinners, gifts, ball games, etc. Now days it seems that an educational venue is one of the few formats that are not frowned upon. Law firms may also find that some companies are reluctant to work with very small firms. I have advised by insurance companies that they like to see a certain level of bench strength (backup). The firm does not have to be a large firm but often the insurance company likes to see a minimum of four or five lawyers in a firm. Candidate law firms will have to a have track record of success, understand the business, and be able to accommodate the unique billing (including electronic LEDES billing), case management, and reporting requirements that insurance companies require.
Here are a few ideas for firms to get started:
Risks and Strategies
Insurance defense law firms that have been approved as panel counsel for multiple insurance companies can inadvertently find that their revenue base is increasingly dependent on a shrinking number of insurance companies over time.
Recommendations from Claims Managers
Our firm recently completed client satisfaction interviews for several of our insurance defense law firm clients. Here are a few quotes and a summary of what these insurance company law firm clients told us:
I suggest that you start by talking to your clients. Much can be learned by talking to your clients. Structured telephone interviews conducted by a neutral third party can provide many surprises as well as answers. Client satisfaction interviews can be the best marketing investment that you can make.
The End Game
The present state of the insurance defense practice presents numerous challenges to law firms that concentrate on insurance defense. 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.
For some 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. Some of the following actions will be required to reinvent the practice and stay in the game:
Firms that dabble in insurance defense work will exit or diversify their practices.
John W. Olmstead, MBA, PhD, CMC is a Certified Management Consultant and president of Olmstead & Associates, Legal Management Consultants based in St. Louis, Missouri. Olmstead & Associates is a management consulting firm that works with law and other professional service firms ranging in size from 100+ professionals to firms with solo practitioners. The firm founded in 1984 serves clients across the United States and internationally assisting them with implementing change and improving operational and financial performance.
John has over 46 years of experience working with law and other professional service firms. His assignments have ranged from marketing and strategic planning to other legal management engagements such as organizational change, firm governance, succession and exit planning, implementation of technology, financial management, staff development, partner compensation, and practice management. John has helped clients implement client service improvement programs consisting of client satisfaction surveys, program development, and training and coaching programs. His assignments have covered the spectrum of management issues. However, in recent years much of his time has focused on engagements helping firms with:
John has presented at conferences and workshops for bar and other professional associations at the national, state, and local levels. He has authored numerous articles on law office management in local, regional, and national law office management publications. John is currently serving as Editor-In-Chief, Thomson Reuters Legal Solutions (formally West Group), The Lawyers Competitive Edge: The Journal of Law Office Economics and Management. John also writes a weekly column on best practice tips for the Illinois State Bar Association’s Illinois Lawyer Now Blog. http://iln.isba.org/blog/best-practice-tips.
John has a MBA in marketing and finance as well as a Ph.D. in Business in Organizational Psychology. He is an associate member of the American and Illinois State Bar Associations, a member of the Institute of Management Consultants. John is a past Chair and a current member of the Illinois State Bar Association Standing Committee on Law Office Management and Economics. He is past President and member of the Board of Directors of the Institute of Management Consultants – St. Louis Chapter.
John may be contacted via e-mail at: email@example.com.
Additional articles and information is available at the firm’s web site: www.olmsteadassoc.com and blog at
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