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AIG to Launch Data-Driven Legal Ops Business in 2016

Oct. 20, 2015, 12:27 PM

The Legal Operations Company, LLC may not mean much to managing partners now, but that could all change in a few months.

On Monday, AIG announced at the Association of Corporate Counsel’s annual conference taking place in Boston that it is launching a new company in January 2016 which aims to establish more competitive pricing in the market for legal services.

Called the Legal Operations Company, it will use AIG’s internal data on the market for legal services to advise external corporate clients on how to set competitive pricing, how to establish a consolidated outside counsel panel and how to identify areas where its legal operations could be more efficient.

Aaron Katzel, AIG’s global head of legal operations, explained, “The legal services marketplace … hasn’t been terribly good about delivering information about what the right costs for services are and the right value is for the services that are being delivered.”

AIG aims to change that through its new and separate company, The Legal Operations Company, Katzel said.

Companies will pay an undisclosed fee for access to AIG’s data – and knowhow, via its 80 legal operations specialists around the world – to better inform their view on law firm pricing and how to improve efficiency in their legal operations.

Katzel said that based on AIG’s market research, there are close to 50 companies that spend more than $300 million on legal services per year, and AIG is primarily targeting those companies as its primary clients.

He added: “As the business continues to evolve, we are aiming to provide legal services for smaller consumers of legal services, companies that have less than $300 million of spend annually a year.”

AIG spends more than $2 billion in legal services per year and manages more than 1,500 law firms, according to Katzel.

During the past three and a half years, he said its 80 professionals staffed in its in-house legal operations team compiled a robust database that can create benchmarks for how to staff cases and deals, and how much money companies should pay their lawyers.

What could be worse for law firms? Well, here’s something: Katzel says that the new business also plans on keeping a records’ database filled with benchmarking market data from clients of The Legal Operations Company to keep building its institutional legal market knowledge.

“We will never share any individual client’s data with any other client,” Katzel stressed. “They entrust us with the confidentiality of their data and we would never do anything to jeopardize that.”

“However,” Katzel continued, “analogous to the situation that we are in already as manager of AIG’s legal spend, we collect a lot of data on market trends, so we can get an understanding across various industries across various clients about what the median cost is to say, litigate a primary causality case in a particular jurisdiction in the US – and that kind of market data across multiple clients in our network on an anonymized aggregate basis ultimately is meaningful for clients.”