Posted Aug 15, 2012 05:13 pm CDT
After a change ushered in with the United Kingdom’s Legal Services Act allowing nonattorneys to have an ownership interest in law firms, a number of insurance companies are planning to either bring legal work in-house or set up their own law firms as a cost-cutting move, a study has found.
If the research by Espirito Santo Investment Bank proves to be correct, private law firms could wind up losing a substantial amount of the approximately 5 billion pounds in legal fees that the insurance industry currently antes up each year, Legal Week reports. Those legal fees amount to about $7.84 billion in U.S. dollars at the current exchange rate.
Law firms that do continue to get such work could face increased pressure to cut their own costs as insurers look for law firms willing to agree to fixed-rate fees.
“The problem many insurers are facing is the massive number of personal injury claims and so an attempt to bring some of this in-house or look for other ways of managing it would make sense,” an unidentified managing partner in a London insurance firm tells the legal publication.
However, specialist law firms in London likely will not be as much affected by the potential change as those doing high-volume elsewhere, he continued, saying that it will take time for insurers to develop alternatives to provide representation at the same level.