AA Law recently announced that it is shutting down its legal services activity, having declined to take on any more clients since November. When it was originally formed in 2013, it partnered with Lyons Davidson to offer personal injury services to its clients.
In the last year, AA Law’s business has slowed sufficiently to force a ‘strategic review’ of its activities. The AA Law brand simply wasn’t doing enough business, and is considered to be in the process of leaving the market.
The shockwaves of ABS
The AA’s move into the legal market followed the introduction of the Legal Services Act, which was made law in 2007. It sought to improve competition among legal firms by bringing new entrants into the market.
The Act essentially allowed brands like AA to offer legal services under an Alternative Business Structure (ABS) – an alternative to the traditional law firm. It also meant that legal firms could allow investment from parties who came from outside the legal sphere.
As such, the ABS essentially disrupts the traditional career path, allowing staff of the non-legal side of the company to cut in and invest. When the ABS was announced, there were concerns in the sector that quality would slip, and that fixed fees may force prices down. At the same time, the ABS has opened up training and allowed apprenticeships to be offered.
The AA therefore had the flexibility to bypass a panel system for claims. Other brands were quick to get in on the act. BT, Admiral and other household names now have ABS offerings that are designed as value-added services to their core offering.
But despite this, it seems that AA Law was not gaining the traction or customer base it needed. Perhaps this is because customers don’t buy legal services in a predictable way, and are not necessarily brand-aware. After all, shopping for legal services is not quite the same as shopping for a telephone line or a car insurance policy, is this is perhaps why companies like the AA did not generate the client base they had expected.
Pros and cons
Companies like AA Law have proven that mixing business and law is not easy. The ABS has given us a market where law firms don’t necessarily have to be run by lawyers, which is a concern for the firms that are. At the same time, clients are open to new ways of working, and they want to see efficiency and innovation. The legal sector could arguably learn a lot from its corporate neighbours, particularly when it comes to agile working practices and a more open attitude to change.
Nobody really knew what would happen when brands started to become lawyers, and forming an ABS is a very slow process, so it was bound to be a while before the first casualties emerged. Consumer choice may have improved, and competition may be healthy, but AA Law is one of the first high-profile failures that may prove that the local solicitor need not worry just yet.