A paradigm shift in the legal services industry
Ask anyone in the insurance and reinsurance market what keeps them awake at night, and the list is likely to be long. Governments, regulators, consumers, the courts—not to mention internal cost constraints—all bring their own brand of challenges at a time when claims disputes continue to rise, solvency concerns grow, and professionals increasingly find themselves the target of negligence claims.
But amid all this, have the law firms serving the market—the ones ostensibly hired to fix problems—become yet another source of pressure on the industry?
Lawyers at Goldberg Segalla say that has been the case for far too long, and they aim to turn things around.
“The insurance industry is facing unparalleled challenges,” says Clive O’Connell, who joined Goldberg Segalla to open its London office in 2012. “Nobody who works with the insurance industry can expect to be insulated from these challenges—least of all lawyers. We’ve looked at the challenges that affect our clients and we’ve looked at what we can do about the way we work to help our clients face those challenges.”
Daniel W. Gerber, a New York-based partner at the firm and co-chair of its Global Insurance Services practice group, echoes that sentiment. “The prevailing model of legal services in the insurance industry is fundamentally flawed,” he says. “Lawyers should be part of the solution for their clients, not another part of the problem or a source of worry.”
Time to refocus
Gerber and O’Connell say their firm was founded 12 years ago with the specific intent of fixing what its originators saw as a broken model of doing business.
They note law firms too often see themselves as annual ventures focused on profits in the short term, rather than on cultivating long-term partnerships with clients. “When year-end profits per partner is the focus of a firm, that drives everything they do and impacts the quality of service they provide,” Gerber says. “Ultimately, they’re more concerned with things like chargeable hours, who has what resources, or who gets a corner office, than they are about the results and the claim.”
According to managing partner Richard J. Cohen, Goldberg Segalla was designed to approach the provision of legal services from the opposite angle. He worked as one of its founders to put into place systems that reward teamwork and long-term relationship building over internal competition for billable hours.
"When a file comes in, there is greater incentive for our lawyers to make sure it gets into the right hands—the lawyer best fit for the particular matter."
“We chose not to instill a draconian minimum-hour requirement because we didn’t want that type of cut-throat environment,” Cohen says. “When a file comes in, there is greater incentive for our lawyers to make sure it gets into the right hands—the lawyer best fit for the particular matter, who can get a better result in half the time—than to try to wring excessive hours out of it.”
Cohen points to David Maister’s True Professionalism treatise as the source of many of Goldberg Segalla’s internal principles. “We were so inspired by it. To this day we still require every lawyer who comes on board to read it, to help them understand where we’re coming from. In just 12 years, we’ve grown organically from seven lawyers to 170—I think that shows our approach is something clients in the insurance and other markets have been longing for.”
Gerber acknowledges that just about every firm attempts to sell the concept of teamwork. So what makes Goldberg Segalla different?
“When clients or potential clients ask me that question, I tell them they should ask questions of their lawyers about how their firm operates,” he says. “Ask what they do internally. What are their chargeable hour requirements? How do they assign their cases, and how do they get them to the right people? The answer will be in those details.”
Lawyers must ‘feel the pain’
“It all starts with truly understanding the client’s business,” Gerber says. “Our philosophy is, you have to walk in their shoes and feel their pain. You have to understand the pressures they are under and do everything you can to help them face those pressures. As one example, we have worked extensively to develop processes in our firm to ensure we follow our clients’ guidelines so we can help them keep their claims leakage numbers down.
“I recall being at a conference in recent years where most of the lawyers in the room didn’t even know what claims leakage was. We know how important that is for the claims representatives and their managers—again, as a vendor to them, it’s about being part of the solution, not part of an expensive problem.
“Clients are looking for cost certainty,” he continues. “They want law firms that will understand that and work with them. Insurers don’t have a problem with law firms making a profit, but they want their law firms to work hard to manage their margins, to manage their efficiencies, and to pass those efficiencies along in costs.”
Returning to professional roots
For O’Connell, the broken model stems from the legal profession losing sight of its true purpose. “During the course of my career in England, law has gone from being a profession to being a very much numbers-driven business,” he says. “When it’s taken over by those numbers, you forget the professional service you’re meant to provide. Lawyers have to remember what they’re there for.
“The insurance industry has shown the way in recent years,” he continues, “with the shift to a customer-service focus and the renewed emphasis on proper and efficient payment of claims. Law firms have to follow—they must mirror that ethos or they will be left behind. Once insurers get to work with a law firm that really lives by that service ethic, they will see the value of it, and the standard will rise.”
Daniel W. Gerber is partner and co-chair of the Global Insurance Services practice group at Goldberg Segalla in New York. He can be contacted at: firstname.lastname@example.org
Clive O’Connell is head of Goldberg Segalla in London. He can be contacted at: email@example.com