Legal blog: a marriage made in heaven

I am in no doubt that the relationship between insurer and lawyer has changed significantly during my 24 years in the profession. From a time when insurers had numerous large, small and regional firms servicing their litigation, we have moved to a fairly steady state of no more than a handful of firms on a core panel.

This, of course, has been driven in part by the reduction in litigation, following various government and judicial initiatives, but it is also a sign of the times. Increasing regulation of both provider and supplier has driven a consolidation and a reduction to larger mainstream insurance law firms. The latest government proposal is only likely to see that situation accelerate.

So why change? The relationship between insurer and law firm probably has never been closer but it is still at arms-length in many respects. The advent of alternative business structures clearly provides the opportunity to do something different if insurers have sufficient appetite for it.

Replacing lost referral fee revenue

Where better to start than to address the increasingly likely abolition of referral fees? With the justice secretary indicating his preference for a complete ban and the prime minister seemingly supportive of that approach, I am sure that insurers will want to turn their minds to how they can replace the lost revenue.

While there has been much speculation as to whether composite insurers have any sort of desire to own their legal providers, none of the main players have rushed out of the blocks to confirm that they will be moving into the legal sector, save for the odd exception. The creation of an alternative business structure, specifically for the purpose of servicing claimant personal injury cases, surely represents a good opportunity for the insurer to dip its toe into the water.

A win-win situation

A genuine profit-sharing arrangement with a law firm would be one option or even for the insurer to own the law firm and perhaps pay a management fee; either way, it may well whet their appetite for a broader offering.The delivery of a quality offering to their customers, not only of an insurance product but also being seen to resolve their claims, whether at fault or not, may well enhance their overall proposition.

For law firms, anything they can do to position themselves as an extension to an integral part of their insurer clients’ product offerings can only be a good thing. If the customer sees a genuinely seamless service at a point when they will undoubtedly be experiencing levels of stress, it feels like a win-win situation.

The suggestion that insurers may set up an alternative business structure is not a novel one. The abolition of referral fees however may actually be the trigger for insurers to do something about it. We shall see.

Tim Oliver is president of Forum of Insurance Lawyers (Foil).