Gracechurch’s 2016 Insurance Law Report revealed a high level of disruption in the London market's insurance legal sector, driven by major changes for insurers.
Less business was being placed with virtually all the law firms in the survey – with some dramatic shifts especially in the middle and lower tiers observed in 2016, Gracechurch said.
This was mainly driven by a significant fall in the number of disputes, the insurance-focused research firm said, often because insurers are less willing to get into conflict with policyholders.
Despite this, the three players with the biggest market share, as ranked by Gracechurch – Clyde & Co, Kennedys and RPC – managed to hold on to share (see chart).
This the research firm attributed to a combination of international and specialist capabilities and coverage that are in demand from London market re/insurers
“These figures illustrate an emerging group of new, ambitious businesses intent on winning share. DWF and BLM have both increased their share of mind and voice by over 200% since 2012,” said Ben Bolton, CEO of Gracechurch.
“They appear be mainly threatening the middle ground of the sector. This situation is fascinating, suggesting that the whole area is ripe for change,” said Bolton.
Three major trends were common to all insurers that participated in the research, Gracechurch suggested.
One was desire to grow their topline, particularly by entering new markets internationally.
Another was keeping costs down, in the context of low investment income and depressed underwriting returns.
Client retention was another common focus, with market competition fierce, handling claims in a way that retains the right business is vital, Gracechurch suggested.
Bolton continued: “There is no doubt that the law firms in the insurance sector are being significantly impacted by strategic changes in the industry they support.
“The challenges to insurers’ top and bottom lines means that they want law firms to understand and respond to their commercial aims in a number of ways,” he said.
Price was not the only important factor, he added.
“Segmentation of work is particularly important – delivering efficient low cost services in the high-volume space and technical knowledge and expertise to support complex claims matters,” said Bolton.
“Insurers also genuinely want to build deeper relationships with firms. Their desire to create panels of suppliers means they can work with fewer people to create better relationships,” he said.
“With better relationships, they find they get a better quality of support. And, with an increasingly global footprint, insurers also want assurances that their legal partners can help them resolve disputes in other parts of the world,” Bolton added.
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