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  Five Alignment Strategies for Insurance Clients

Author: Lori D. Brazier;    OBA Insurance Law News    February 2003

The latest issue of Altman Weil's Report to Legal Management reported the results of the third annual survey of chief legal officers attending the annual conference of the American Corporate Counsel Association (ACCA). Part of the survey focused on satisfaction with services from outside counsel. More than half of the respondents indicated that they planned to replace one or more of their outside firms in the coming year. The most common reason cited was a lack of responsiveness. Other reasons included inattention to the number of hours billed, a failure to adequately control expenses, mishandling of critical ("bet the company") matters and the inability to deliver the desired results.

The dissatisfaction with responsiveness was echoed in a recent Canadian study benchmarking practices in a cross-section of corporations that are regular users of outside counsel. The majority of participants were insurers. General Counsel were asked what they would like to see law firms do differently. Here are some of the responses:

  • "think creativity rather than embarking on the litigation route without exploring all avenues of litigation"

  • "focus on earlier resolution"

  • "push a file faster"

  • "develop a better understanding of our business"

  • "suggestions on how to economize"

  • "be able to reduce overall legal costs"

  • "results would be improved with a more efficient allocation of the work", i.e. more attention to managing workflow

  • "delegate appropriately commensurate with complexity"

  • "be more than just a supplier and add value"

  • "understand that business people and internal counsel work on a much shorter time frame in turning work around - re-define responsiveness in terms of hours and days, not weeks"

Such comments underscore a need for a greater focus on understanding and meeting client needs. It is no longer enough to just focus on the files. Sitting down for an hour or so at least once every 6 months with insurance company representatives is a good start. The goal should be to find at least three ways of doing business differently. Law firms that make the time will reduce the risk of losing out when preferred counsel rosters are reduced or modified. And some insurers will be less finicky about rates with firms that give them the service and results they need.

There are five strategies for law firms to become better aligned with their insurance clients:

    1    Develop 3 - 5 goals against which your firm can be evaluated. Make sure they are SMART ( Specific, Measurable, Achievable, Realistic and Time-Targeted ) and that their achievement makes a difference to the insurance company.

    2    Be more than responsive - be proactive. Make sure claims representatives always know the status of every file. Ideally this means investing in a secure web-based file information system accessible 24/7. But an intermediate step is to use support staff and paralegal resources to facilitate communication.

    3    Delegate, delegate, delegate. Generate revenue in the most efficient way, using resources whose rates reflect the complexity of the work. A lot of work being performed by partners in law firms today should be handed off to associates and paralegals. Experienced paralegals can deliver more in fewer hours than most entry-level associates and students.

    4    Be rigorous and realistic about case planning and budgeting. Map out what needs to be done, and estimate the resources that will be required to complete the various tasks required. Set an hours target for all tasks or phases, and ensure that everyone on the file is aware of the targets. Although every file has a unique fact scenario, it is usually straightforward to estimate the number of hours required for specific tasks or phases, based on a comparison with files of similar complexity. The managing partner of an insurance boutique commented recently that he knows what every file should cost. The goal is to effectively manage the volume of hours so as to keep the costs reasonable, as well as to avoid wastage in the law firm and reduce the need for write-offs and write-downs.

    5    Experiment with non hourly-based billing. Why not propose that all work on specific files use a single blended rate? Or a single fee for each major phase of the file? This is feasible with a case plan to estimate the time and resources required to complete tasks and phases.

Above all, dialogue with and listen to the insurers. Responsiveness will pay off in the long run. Remember that inside counsel and claims managers who may seem unwilling to entertain discussions may simply be overworked or uncertain about how to respond to innovative proposals. And remember that, like lawyers, claims professionals are trained to question and challenge.

Discussion about how to impress insurers and still generate profit will continue at the half-day session to be hosted by the Insurance Law Section at the OBA Annual Institute in Toronto on March 20th, 2003. Be sure to attend!

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