Client Spotlight: How a 2025 Analysis Restructured a Three-Year, Multi-Million-Dollar Carrier Agreement
Executive Summary
In 2025, Law Firms of the Future supported an insurance defense firm in restructuring a three-year, multi-million-dollar carrier agreement by replacing intuition with disciplined financial analysis. Using ALFA, Advanced Law Firm Analytics, the firm identified structural losses embedded in fixed and phased fee arrangements and realigned risk, pricing, and incentives with the carrier. The result was a materially improved economic outcome, enhanced reputational credibility, and a more sustainable long-term client relationship.
Preventing significant losses from fixed and phased fee structures while preserving the client relationship
Insurance defense firms operating under fixed and phased fee arrangements face a unique and often under-appreciated challenge. While fixed fees are relatively new for some insurance defense firms, the use of separate fee arrangements for each phase of litigation is an even more recent phenomenon, and its economic impact has not been well understood or consistently priced by law firms. The economics of this work rarely align neatly with how risk, effort, and time actually unfold over the life of a matter. When those misalignments go unexamined, firms can quietly absorb significant financial losses while appearing operationally sound on the surface.
In 2025, Law Firms of the Future was engaged by an insurance defense firm approaching renewal of a three-year, multi-million-dollar carrier contract. Firm leadership had a clear sense that profitability was under pressure, but traditional reporting did not explain where or why. The upcoming renewal represented both risk and opportunity. Without a rigorous understanding of the underlying economics, the firm faced the prospect of locking in another multi-year agreement that could further erode margins.
Moving beyond rates to economics
The first step was to move the conversation away from rates and realization and toward true economic performance. The engagement required integrating timekeeping, billing, collections, and work in progress data across multiple systems. This integration was essential to establish a matter-level and phase-level view of profitability that reflected how work was actually delivered, not simply how it was billed.
Using ALFA, Advanced Law Firm Analytics, we built a unified analytical model that allowed leadership to examine profitability across matter types, phases of litigation, and staffing configurations. The analysis incorporated cycle time, staffing leverage, write-downs, cash flow timing, and completion patterns. Particular attention was paid to long-tailed litigation, where extended timelines and unpredictable complexity often shift risk disproportionately onto the firm.
Identifying structural losses within fixed and phased fee work
As the data came together, it became clear that the firm was bearing undue risk exposure in several areas. Certain phases of work were consistently generating significant financial losses due to required over-investment in delivery relative to the fixed or phased fee structure. These losses were not driven by inefficiency or poor execution. In many cases, they were the predictable result of fee structures that failed to account for the true variability, duration, and risk of the work.
At the portfolio level, overall profitability obscured the reality that some matter types and phases were subsidizing others. Over time, this dynamic threatened both financial performance and strategic capacity. Without intervention, the firm would have continued absorbing risk that more appropriately belonged with the carrier.
Reframing the renewal discussion
Rather than approaching the renewal as a request for higher rates, the firm entered negotiations with a data-backed economic narrative. The analysis allowed leadership to clearly articulate where risk had shifted, how costs were incurred across the life of a matter, and which elements of the fee structure were no longer sustainable.
The recommendations focused on optimizing the overall relationship with the carrier. The objective was to realign incentives so the carrier’s goals around cost containment and risk reduction were compatible with reasonable and sustainable revenue expectations for the firm. This reframing shifted the discussion from pricing to economics, risk sharing, and long-term viability.
Outcomes grounded in alignment, not confrontation
The depth and clarity of the analysis exceeded the carrier’s own internal insight and reframed the renewal discussion. It was noted that among the carrier’s panel firms, this firm may have been the only one to return with a comprehensive economic analysis rather than simply requesting rate increases. The level of preparation and rigor elevated the conversation and strengthened the firm’s credibility as a thoughtful, disciplined partner.
The restructured agreement shifted meaningful risk back to the carrier, preserved profitability on fixed-fee work, and supported a 40 percent rate increase on non-fixed-fee litigation matters. Importantly, these outcomes were achieved while maintaining the long-term client relationship.
The broader lesson
This case study underscores the power of disciplined, data-driven decision-making over intuition alone. Rather than relying on anecdotal experience or surface-level reporting, the firm invested in a comprehensive forensic assessment of its economics across the full life cycle of its work. That level of rigor remains relatively uncommon in the legal industry, particularly in the context of fixed and phased fee arrangements.
The analysis was enabled by ALFA, Advanced Law Firm Analytics, which allowed the firm to integrate disparate data sources and model profitability, risk exposure, and fee structures with precision. In doing so, the firm demonstrated a level of financial sophistication that enhanced its reputational credibility with the carrier and carried forward into its broader client relationships.
This engagement reflects a consistent theme across our work. Whether advising insurance defense firms, contingency practices, or multi-practice firms with complex portfolios, the objective is the same. Replace assumptions with insight. Align pricing, staffing, and risk with the full economic life cycle of legal services. Over time, that discipline becomes a durable competitive advantage.
Josh Kalish, MBA, CFA, CLM
Managing Partner
+1.919.724.9000