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According to data from the latest Enterprise Legal Management Trends Report, the insurance industry experiences the lowest volatility in legal fees. The report notes “volatility is a calculated indicator of blended rate variability. Higher numbers suggest a better opportunity to negotiate rates and or the assigned time keeper mix.”
On this graph, the vertical markets of “Regulatory & Compliance” and “IP – Trademark” earn volatility rates of 10. Insurance, by comparison, earns a volatility rate of just 3. This makes legal work in the insurance vertical a good candidate for alternative fee arrangements – and best practice is to implement AFAs in phases or stages.
“Stage-based AFAs are a good practice for the insurance industry because they bridge the gap between detailed hourly models – which reward time spent versus work performed – and flat fees – which are too broad, too risky, and lack detail or control,” says Dan Ruderman with the LexisNexis® CounselLink® team.
“In a stage-based model, firms and insurance carriers can agree on what needs to be done, and break it down into meaningful, manageable stages based on the case type.”
Mr. Ruderman says insurance carriers have two distinctions from other corporate law departments: volume of cases and volumes of data about those cases. This means getting the right lawyer, for the right case, working toward the right outcome, and at the right price, is imperative.
How to Implement Stage-Based AFAs
Next week, Mr. Ruderman will be presenting a free one-hour Webinar on how to implement stage-based AFAs. The webinar will center on the insurance and risk management vertical but it will certainly be useful information for anyone in corporate legal who is exploring AFAs.
What: Stage-Based Fees: Making This Proven AFA Technique Work for You
Who: Insurance carriers, claims departments and corporate legal
When: Tuesday, October 28, 2014 at 2:00 p.m. ET
Where: Free online webinar, register here.
Photo credit: Flickr, CC BY-NC-ND 2.0
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