Is it time for solicitors to panic? The significance of the announcement that the AA and Saga have launched legal services websites is less in what they are offering but in the fact that they are the latest big brands to see potential in the legal market.
The AA actually dipped its toe in the water some time ago, while the Halifax and Which? are already in there and the Co-operative group, which has built a £20m legal business over four years.
The AA and Saga are owned by the same trio of private equity firms – Charterhouse, CVC and Permira – and are looking to capitalise on their strong membership base (15 million for the AA, while Saga has 2.7 million customers). Legal services are an obvious extension to their existing financial services.
The new services will direct those with legal issues to an automated legal document assembly tool and/or a firm of solicitors. They will be marketed individually to consumers or as part of a wider package for existing insurance policy holders.
The intelligent document assembly, provided by legal IT company Epoq, is already used by a host of other institutions (and a growing number of law firms).
If you need a lawyer either to review the document or for more sophisticated legal advice, Cogent Law, which has an existing relationship with the AA and Saga, is on hand at what one assumes are very competitive rates. The small print says customers only get 30 minutes free for a Cogent lawyer to review their document, so it's best not to make it too complicated. What is unusual in this deal is that a law firm is behind the website, rather than an intermediary.
The launch shows that while many are looking to 6 October 2011 and the introduction of alternative business structures (ABS) –which will allow non-lawyers to own and invest in law firms for the first time – much can already be achieved under the present rules. All this mean is that, for the next 11 months, the AA and Saga cannot buy a law firm (and may well not want to anyway; Halifax has been clear about that) and cannot undertake the limited range of reserved legal activities, about which I have blogged before.
But there is nothing to stop them referring such cases to Cogent, and a quick bit of mystery shopping indicated that for doing so they will receive 15% of the fees Cogent invoices the client. This is another reason why the AA and Saga may not feel the need to buy a law firm when the rules allow.
There are some other key points to draw from all this. Firstly, the AA and Saga see legal services as an add-on to their insurance offerings. Many people already have legal cover in this way (but often don't know it) and the government is keen to sign up more, as it looks for alternatives to legal aid.
Both Lord Justice Jackson, in his review of litigation costs, and the Tory peer Lord Young, in his recent report on compensation culture, supported greater use of insurance. Others, such as CPP Group, are looking at similar low-cost, but not insurance-based initial legal advice models, to help people with everyday legal issues. The big question is whether the public can be persuaded to spend money in anticipation of needing legal help.
Secondly, most retail models emerging at the moment are online or telephone-based. While some legal markets such as personal injury, have already embraced this, there is still a role for face-to-face advice, for which high street solicitors will be grateful. Where things will get really interesting is if a brand looks to establish a physical presence too – the Co-operative group, which has the real estate, has not ruled anything out.
Thirdly, is the observation that seeing how different the AA and Saga's experiences are could be significant to how the legal market develops. Will Saga's over-50 demographic be willing to receive legal advice in a less traditional manner than they are used to?
Finally, perhaps Cogent is as noteworthy a business as the ones they are working with. It is part of the Parabis Group, an insurance-facing business that, in addition to law, provides loss adjusting/claims handling, risk assessment, health and safety, rehabilitation, case management systems and management consultancy services. This kind of one-stop shop of legal and related non-legal services is seen by many as the future.
A survey from accountants Baker Tilly recently revealed that more than half of law firms had either already lost or expected to lose work to non-lawyer competitors. As we head towards ABS and more non-lawyers seek a piece of the estimated £15bn consumer legal market, it is a figure that should only keep rising.
Neil Rose is the editor of www.legalfutures.co.uk