I heard a report on the news this morning that in a recent survey, lawyers have indicated that they expect a dramatic decrease in business in 2009 and do not anticipate earning income at the same levels they earned in 2008. Really?
That may be true for mergers & acquisitions, and other similar purchase related transactions, but I do not believe the current economic downturn will have a similar affect on the insurance industry. In fact, I believe it will have the opposite affect.
I think the upsurge in litigation stemming from the collapse of the credit markets and the mortgage industry could surpass levels ever seen before. Litigation during these times could include some of the highest settlement amounts, parties sued, and parties suing. Insurers are bound to get caught up, due not only to defending their interests, but also mainly due to their policy responsibility of defending insureds for litigation brought against them.
Some insurance carriers are gearing up for that increase in defense costs. The Hartford is already battening down the hatches in preparation for a litigation hurricane. As the insurer for The Peanut Company of America, they have gone to Federal court for clarification on the liability coverage in their policy, in preparation for the litigation defense costs and settlement payments for the over 1800 product recalls and related illnesses.
People are losing their jobs and can’t make their payments on their Lexus because they over extended in the boom of ’07. So those vehicles end up on eBay, on fire, or in a chop shop. Insurance SIU departments see a swell in claim counts. The number of injuries in car accidents goes up. These are times when an insurer’s Corporate Performance Management (CPM) and the ability to analyze their own data against their goals, along with incorporating automated processes can really pay off and keep expenses down. The identification of fraud also becomes key to insurer’s weathering the storm. Lawyers send people to the same doctors and vice versa. I remember a case of fraud where a doctor was reported to be treating 1600 people in one day. So, who gets involved in all these areas – lawyers. Both on the claimant and on the carrier side.
Traditionally economic downturns are the biggest catalyst for increases in insurance claims and insurance fraud – people need money. The decrease in policies written, coupled with the increase in policies cancelled for non-payment of premium, is not as dramatic a cost change as the increase in claims. People still recognize the need for insurance and recognize the importance of maintaining that policy. However, insureds, and claimants, feel they’ve been paying the premiums on their policies and now they need to get some money back.
I can’t see insurance lawyers experience that much, if any, drop in revenue during this recession.