Posted by Rory Wilson, business development manager at Litigation Futures sponsor Amberis ATE Solutions
As we approach the second anniversary of implementation of the Legal Aid, Sentencing & Punishment of Offenders Act 2012, many firms are now starting to recognise a way to work under the new conditions and look towards growth and expansion.
In the months leading up to implementation, the question of survival was dominating conferences and media publications alike.
Many firms considered moving out of the PI market place entirely, and observers prophesised the downfall of all but the largest firms due to the demands of working in an perceivably impossible market. If closures weren’t to be seen, then mass consolidation would be the net result, with firms joining forces to compete with the behemoth, investment-backed corporations led in part by the advent of alternative business structures.
Despite such pessimism, the majority of firms embraced the changes, and looked to their own internal processes and structures to re-model the blueprint for profitability.
Some decided that diversification was the key, moving into generally unaffected areas of personal injury or focussing on high-value cases too complex to manage through a fixed-cost portal process.
The casualty rate has been far lower than many thought, save for some high-profile closures not all related to LASPO but certainly influenced by it. The much-publicised professional indemnity issues experienced by a number of firms led to others taking advantage by acquiring WIP on more profitable pre-LASPO cases to assist in their growth.
Small firms are realising there is still a market for a high street presence and even the acquisition of new work. While most will agree that re-scaling, downsizing and streamlining has been a difficult process, it has provided them with a sustainable method of approaching PI in the modern environment.
The market still exists and while actual numbers are often disputed vehemently from both sides, there is no indication of a landslide drop in claims. Firms have now started to be able to profile settled cases and are seeing that with the right changes profit can be made. Anecdotally, solicitors have suggested that profit margins range between 10% and 17% – an enviable level in any industry, not just the legal profession.
For suppliers, the past two years have perhaps not been as busy but the concerns were mutual in the lead up. While firms focused on re-structuring and profitability, little time was, or could be, spared looking at the supporting role suppliers played commercially or in terms of efficiency.
The changes, then and subsequently, have forced suppliers’ hands also. The need to innovate and redefine their product offerings was needed to breathe new life into an industry which had become stagnant and tied.
After-the-event (ATE) insurance was believed to be the first major casualty with the introduction of qualified one-way costs shifting; however, it was soon realised that it wasn’t the ‘perfect solution’.
ATE insurers scrambled to develop the right products at the right price for the market, whether it be a firm umbrella policy, part 36, fixed or staged premiums. Time was given to refine products by the fact that many solicitors simply continued with their incumbent Insurer as time was focused upon their firm’s survival.
The result is an almost entirely new ATE landscape and a new attitude to risk from insurers. Some are identifying the need for an efficient way to offer protection through integration and minimal reporting, while others are tightening their belts and bracing themselves for a possible influx of pre-LASPO claims.
With so much on offer and each insurer having their own features and benefits, it is extremely difficult and time-consuming for solicitors to assuredly make the right decision for their clients. Firms should turn to brokers.
With the market finally settling, now is the time for firms to look to their suppliers and see what further efficiencies can be drawn from the selecting the right partner. Case management systems have never been more automated, effectively running many aspects of a claim without the need for human interaction. Funding is in demand and with the emergence of auditing firms and WIP appraisal companies, the wariness and anxiety of banks is being removed.
The world in which we operate is still not perfect; the price of new work is still reportedly too high, inflated by the investment backed giants whose initial intention was to starve competition of new work. High-profile closures are still expected, either through lack of adjustment, over confident growth strategies or diversification gone wrong.
It is not the time to rest on your laurels but it is the time to keep moving forward and look at what else the industry can offer you. Just because an efficiency has been found doesn’t mean it can’t be improved. Profitability can be improved!