It is particularly harder for some of the smaller law firms to stay in business as in 2010 the UK government introduced civil cost reforms for low value road traffic accident claims via an internet based web portal service. The impact of this has been to drive down fees for low value cases and has resulted in a fall in profitability for Public Injury Claims law firms. Further government proposals to reduce the portal fees combined with plans to include employers liability and public liability cases is now causing serious concern. Many solicitors are predicting significant cuts in profitability.
In this very competitive, complex area where a large number of factors come to bear it is not surprising that Law firms seek new technology to drive out administration costs and improve revenue.
I was fascinated to hear recently about one such law firm based in Northern England who used Monte Carlo analysis techniques.
They called on the expert advice of Holleth Analytical Solutions.
Who assessed the problem technically and identified that these changes are also affecting the fundamental way that the claims market operates so that the impact of strategic decisions can no longer be understood through experience alone.
The Strategic Questions.
Holleth Analytical Solutions were recruited to answer the following questions:
1. What is the future revenue stream for my law firm?
2. What is the likely value of the current Work in Progress I own?
3. What happens to the value of these if:
o I change my current portfolio of cases.
o I introduce new case types.
o I change the amount I spend on marketing.
o The fee structure changes again.
The data sets were small in size as the problem is one of diverse data from a range of different systems within the law firm and there is a need to prepare a robust analytic model to answer the questions.
With the planned introduction of further types of law cases to be included such as employers liability and public liability, many small Law firms may have to re-think the type of work that they undertake, if they wish to stay profitable.