What’s on insurers’ minds for law firms?
While in 2020/21 law firms were juggling competing needs to serve clients, in 2022 there has been a clear movement towards firms placing renewed focus on their people. It’s now more important than ever for brokers to ensure that their clients are demonstrating how they are approaching sustainability and employee health in a thoughtful, meaningful way.
This was a key theme from a February 2022 Travelers Europe’s podcast on how insurers perceive the legal sector right now. Sharon Glynn (pictured, left) interviewed colleagues James Kerr (pictured, centre) and James Graham (pictured, right) about the risks law firms are facing—and how they can improve their ability to manage them. For firms, setting the right tone through supervision and ensuring people are working in appropriate roles will be important as they adjust to hybrid working practices while managing high volumes of work.
“We’re interested in how staff are supervised and about how firms are managing continuous professional development.” James Graham
Brokers can support this effort by engaging their clients early to ensure they capture information from the relevant stakeholders within the firm to demonstrate their resilience to insurers in these fast-moving and evolving areas.
“More work means more exposure and more risk,” Kerr said. “We query whether the high levels of activity are sustainable and conducted in a risk-aware way. Resourcing is a key consideration. Are law firms tracking things other than billable hours and profitability? For example, are they tracking utilisation and making sure it’s at sustainable levels?
“Do firms have the right qualified people to work on particular tasks, especially if they are developing new specialisms? A key challenge in the ‘war for talent’ is making sure firms have quality individuals to provide the quality advice that clients have come to know and expect from their legal service providers.
“As insurers, we’re looking beyond pure revenue figures and loss performance statistics and placing greater emphasis on the qualitative aspects associated with running a successful law firm.”
The rise of hybrid working and its effect on firm culture have brought new risks to the surface that insurers must assess.
“We’re interested in how staff are supervised and about how firms are managing continuous professional development,” said Graham.
“Especially for junior staff, who in the past may have been seated next to partners but are now at home, there is less learning by osmosis. It’s also more difficult to identify individuals who are struggling with increased workloads. There are fewer ‘water-cooler’ conversations to check up on people and this can affect the culture. We want to make sure culture is maintained in a hybrid environment,” he added.
New world, new risks
The COVID-19 pandemic has accelerated the need for heightened risk management within law firms in a range of ways:
- The move to hybrid work and accompanying adoption of remote processes have made technology oversight a more important focus, with more firms expanding their in-house IT expertise.
- Real-life reminders of the climate crisis are making environmental, social and corporate governance (ESG) standards a key priority.
- The need to make law firms places in which talented people want to work is also making diversity & inclusion (D&I) initiatives a must-have aspect of a firm’s culture.
Going forward, firms will need to manage these risks in ways that accommodate their employees’ preferred ways of working. The pandemic has given employees two years in which to re-evaluate what they want from their careers and work environments. At a time when talent is in high demand and working away from the office has made people less loyal to their employers, employees have greater power to ask for what they desire—or to find it with new employers.
Firms must foster healthy work environments to encourage talented employees to stay. It’s well known that there is work to be done within the sector to support mental wellbeing. For example, LawCare’s “Life in the Law” study found that 69 percent of legal professionals have experienced mental ill health. This makes for a high-risk environment that can generate claims—and insurers are working with law firms to change that.
“As insurers, we ask questions about staff and supervision, so we know a firm’s employees are given the opportunity to work at their best in places of psychological safety, where they feel safe speaking up if they’re concerned about something,” Glynn said.
“Healthy staff, a supported workplace and a good culture equal a good risk profile and therefore a good risk to insurers.”
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