Companies pursuing the billions of pounds of insurance claims which are contested each year are being failed by a legal industry that is conflicted and dominated by a handful of specialist firms.
Analysis of legal data from the High Court shows that just four law firms are appointed on well over 50% of all insurance cases filed at court. In the vast majority of cases, these firms are appointed to defend insurers rather than bringing claims against them, according to the legal data compiled in the Mactavish Claim Litigation Index.
This bias towards defending insurers can have the effect of leaving solicitors conflicted when it comes to bringing cases against the insurers, and leaving corporates struggling to find specialist representation.
Rob Smart, Chief Technical Officer at Mactavish, explained that while there is nothing wrong with a law firm specialising in defence work it can create real problems in the market. “This data brings to life two problems in the market affecting companies facing a disputed insurance claim. The first is that the decreasing plurality of firms in the market means there is less choice out there. The second problem is that where the experience does exist, all too often it is conflicted.”
The problems in the market extend beyond the law firms that specialise in litigation but also includes the larger, magic circle firms which almost inevitably undertake corporate work for the insurers as part of a chosen ‘panel’ of service providers.
Rob Smart said: “the panel system only works for half the market. Under this system law firms are signed up as potential advisors to insurers, sometimes before any work has been appointed. However, as soon as they are signed up, the insurer has the ability to preclude them from taking on any work they see as unfavourable to their interests, something insurers can be zealous about enforcing. In the legal market where everyone should have access to the best specialist expertise, this is a real problem.
The data harvested from a sample of 1,000 legal cases filed over the last 10 years shows that while the number of legal claims filed against insurers has grown rapidly since 2011, the same cannot be said for the plurality of legal representation. For the first half of the decade cases were more evenly distributed among the top 10 firms, however, since 2018, the top four firms have consolidated their grip on the market, culminating in 65% of all appointments going their way in 2021.
Rob Smart went on to explain how Mactavish has first-hand experience of law firms declining to represent companies in disputes with insurers, even where they have pre-existing relationships with the potential claimant. “This is becoming increasingly common. It is very hard to fight against the buying power of big insurers. They dominate the market for legal services in a way that has exposed flaws in the market.”
Bruce Hepburn, chief executive of Mactavish, said: “This data makes is very clear that now, more than ever, businesses should be looking to alternatives to the traditional legal sector. Companies need advisors, like Mactavish, that are unconflicted whether it comes to buying insurance or providing legal advice on high value disputes. Mactavish can do both, and do it much better than the existing sector.”
Mactavish Claims Litigation Index
The Mactavish Claims Litigation Index aims at tracking insurance litigation and claims performance and getting the market to focus on what really matters, the product you buy with your premiums, not just the premium itself.
Receive our insights in your inbox
Keep up to date with changing risk and regulatory environment, market insights and tips on insurance. Subscribe now.