Posted by Jeff Zindani, founder of Legal Futures Associate Acquira Legal
I will over the next few weeks provide a four-part series on what is happening in the personal injury (PI) marketplace against the backdrop of not only Covid-19 but also the inevitable implementation of the whiplash reforms and increase in small claims limit.
I have spoken with countless partners over the past 12 months about their plans, given the radical changes that are coming. Most firms have accepted for some time that this in many ways is a ‘strategic inflection point’, where there is a fundamental change within an industry to which they need to respond.
It really will be no longer business as usual; running simple PI road traffic cases will be patently uneconomic. The law firms that will really suffer the most are those with what Peter Drucker calls the “delusion that tomorrow will be like yesterday”.
During the pandemic, I have had over 50 telephone calls and virtual meetings with key PI decision-makers of these practices, and I have to say that most are faring well.
It is still difficult for me to understand why even decent-sized practices have not got proper case management systems to allow effective remote working but they are certainly not facing some of the challenges that other law firms have in terms of cash flow problems.
However, there is a large caveat here, because in many ways Covid-19 provides us with a glimpse of what may happen as far as PI practices undertaking road traffic work are concerned, once the reforms finally see the light of day (another stay of execution has been granted until 1 April 2021).
The reforms will mean most firms will only take on a small number of road traffic cases as the majority will either fall within the whiplash tariff or under the £5,000 small claims limit. This has already happened during coronavirus, as I am getting daily calls from firms wanting caseloads as their new cases have largely dried up due to a significant reduction in road traffic accidents.
These firms are not just small practices but large firms that are well run and know full well that there is a bread-and-butter pipeline with this area of work that has effectively come to an end. A partner in a medium-sized practice commented the other day that “my onboarding team have simply got no clients to sign up, so we need new cases fairly quickly”.
My experience is that PI lawyers are at times almost like addicts: if they don’t get a new client, they will go, for want of a better phrase, ‘cold turkey’. Yet this scenario has already become commonplace, and no doubt will remain the same following implementation of the reforms.
When I spoke last September at the PI Futures conference, I made the point that, whilst it may be counterintuitive to many, there are more law firms wanting to buy than to sell. It has become a seller’s market that is even stronger given the high demand during the pandemic.
I suppose that, in many ways, we can’t escape basic demand and supply economics, but I’m astonished that firms selling their caseloads or practices are simply not getting the value they should from what they have.
In many instances, small practices have turned to national firms, which are not one-time players but experienced players and unsurprisingly will not always give them the value they deserve. I have sometimes been contacted very late in the day when firms have got cold feet and are about to transfer their work to a local, ‘friendly’ firm with absolutely no payment on account for their WIP or paid disbursements. It is like giving a stranger the keys to your valuable car!
In my next article, I will explore personal injury law firm and caseload valuation approaches and what is really happening in in this marketplace.