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Posted on: May 18, 2023 by Huntersure
Large law firms face significant threats as the year progresses, with many shifts occurring throughout the industry. In an environment colored by an uncertain economy and fluctuating market conditions, the legal industry may face many challenges in the coming year. Issues with security, technology, economic pressures, and fluctuating demand will impact the entire legal profession, but large law firms are likely to confront the risks on an even grander scale.
Law firms increasingly rely on technology as available tools increase and more firms shift toward remote work. Over 75% of the leaders of large law firms report plans to utilize technology as a cost-reduction tool and for additional purposes. Investment may increase in the area of artificial intelligence as a litigation tool and as a way to increase efficiencies in legal research. Technology could also play a more prominent role in contract management. Additional uses of technology for large law offices include the following:
Increased use of technology raises the risk of cybercrime, which is another one of the common threats faced by large law firms. The sensitive and potentially valuable information housed on a law firm’s database creates an attractive target for cybercriminals. In the 2022 Law Firm Business Leaders Report, 42% of law firm leaders expressed concern about hacking, ransomware, loss of data, and security breaches. Large law firms should have professional liability insurance to protect against damages related to cybersecurity issues.
Billable hours have been decreasing in the legal profession for decades as more lawyers have entered the workforce, but 2022 posted the lowest level of all time. Thomson Reuters Financial Insights reports that this decrease resulted in approximately $98,000 less billing per lawyer than 15 years ago. Likewise, competition for talent is driving salaries up at large law firms. Additionally, increased business development costs, inflation, and expenses related to returning to office work after COVID have caused overhead and direct expenses to increase at the highest rate since 2009.
One of the most significant threats to large law firms is the substantial decrease in demand for legal services that was evident in 2022. Economic uncertainty has caused a decline in transactional work, which has resulted in a precipitous drop in business, particularly for large law firms. While the legal industry remains optimistic about a rebound in business, demand has continued downward for several months.
With the uncertainty of the global economy, changing market conditions, increased reliance on technology, and the associated risks, large law firms must examine all facets of their industry and take steps to navigate the potential threats proactively. Strategic positioning and employment of the appropriate solutions can help all players in the legal industry to continue successful and productive operations in the years ahead.
Huntersure LLC is a full-service Managing General Agency that has provided insurance program administration for professional liability products to our partners across the United States since 2007. We specialize in providing insurance solutions for businesses of all sizes. Our program features can cover small firms (grossing $2.5 million annually) to large corporations (grossing $25 million annually or more). We make doing business with us easy with our breadth and depth of knowledge of E&O insurance, our proprietary underwriting system that allows for responsive quoting, binding and policy issuance and tailored products to meet the needs of your insureds. Give us a call at (855) 585-6255 to learn more.
Posted in: Lawyer Lawyer's professional liability insurance