The use of technology by law firms is growing faster to boost profitability and stay competitive in a market that is changing quickly.
Everyone has heard about the well-known uses of AI in the legal field, from more established uses like contract analytics and discovery to less well-known uses like legal research and due diligence reviews. All of these solutions claim to shorten the time needed to complete tasks that many legal firms classify as “legal work.” It is hardly surprising that partners at law firms, who in 90% of cases still make procurement decisions, have not found this to be a compelling argument.
Why would law firms want to implement technology that would cannibalize their business, as long as they could still charge by the hour? However, since the epidemic, legal services have seen such significant transformation that progressive law firms are now utilizing AI technology to boost their profits by allowing for remote operations, cutting expenses for overhead, and freeing up time for higher-value work.
Instead of going straight after law firms, the majority of legal AI vendors have discovered a consistent flow of customers in corporate legal departments. These customers are required to cut legal costs, and a new sector of alternative legal service providers (ALSPs) has emerged to help meet this demand. The Big Four accounting firms and other ALSPs were fast to adopt alternative pricing structures and use AI technology to carry out repetitive, systematic legal work more cheaply and effectively than law firms clocking enormous amounts of billable hours. Many law firms have been forced to adjust their business models and employ AI technologies at the behest of their clients as these ALSPs have siphoned up “legal work.” It Makes Sense That Many Lawyers Are Tired of AI Given that many law firm partners accuse AI of ripping money straight out of their wallets, it makes sense that they would be wary of the technology.
In fact, AI software that audits and reduces legal firm expenses is one of the use cases of legal AI that is expanding the fastest. A pioneer in legal bill review software, Brightflag increased in size annually until 2020, much to the dismay of the law firms it served with artificial intelligence algorithms. The purpose of bill review software is to act as a barrier to prevent businesses from having to pay legal fees for “clerical or administrative” tasks. However, some contend that these algorithms are more akin to a sword, eliminating the time that lawyers would otherwise need to complete their duties. Legal tech investment had been rising annually before the global epidemic as forward-thinking firms realized they needed to implement new technology to be more productive.
To Stay Competitive, Law Firms Need to Use Technology Strategically COVID-19 changed everything, even though some law firms were able to resist being technological Luddites. It hit the legal industry like a freight train, increasing pressure on law firms to adopt new technology to stay in business, new workflows to allow remote work, and new business models to stay competitive. According to a 2017 Thompson Reuters study, 91% of law firm executives intend to use technology to reduce expenses, and 64% of them identified “insufficient leverage of technology” as a medium-to-high risk factor for profitability.
In 2021, 78% of legal firms anticipate that after the epidemic is over, attorneys would work remotely at least two days a week, according to a recent Cushman Wakefield survey. Almost two thirds of businesses plan to increase their IT budget in order to facilitate remote employment. Attorneys like a hybrid working arrangement, which many companies have discovered, and it also allows legal firms to cut back on their real estate footprints—the second-highest overhead price for them. Due to small and mid-sized businesses transitioning to paperless operations, legal practice management and document management systems (DMS) have experienced accelerated post-pandemic growth. The CEO of CLIO, a legal practice management software that this year was elevated to Unicorn status, Jack Newton, claims that “legal professionals and attorneys who had previously hesitated to adopt technology were suddenly forced to adapt to this new reality rapidly.” Although it is a reaction to the crisis, this technical revolution is long-lasting.
AI Solutions Address Inefficiencies and Expenses of Digital Case File Management However, the switch to digital case files comes with a plethora of tedious, labor-intensive tasks, such as correctly labeling, separating, and sorting incoming documents before entering them into the document management system (DMS). Document intake is typically handled by hordes of file clerks and administrative employees; it is not billable legal or even paralegal labor. Would a law company not want to use AI if it could lower this overhead cost while also making the lawyers who require the documents more productive? An average-sized insurance defense company that receives more than 10,000 pages of incoming mail every day might quickly incur document intake costs exceeding $700,000 annually. Many further say that even after this costly labor, documents are frequently misfiled, inconsistently labeled, and unjustifiably delayed in reaching the recipients. In the past, technology hasn’t really been helpful. The majority of incoming documents are unstructured, including medical records, emails, letters, pleadings, and notices, which is why template-based extraction and typical OCR techniques don’t work. Therefore, matching documents to the appropriate cases and sub-folders, identifying them, and assigning them to attorneys still need to be done by hand, even with contemporary legal document management systems.
Today’s AI-powered legal document intake solutions, such as Extract Filer, use machine learning, computer vision, and natural language processing techniques to match each document to the appropriate matter, automatically split documents based on a firm’s internal file organization procedures, name each document with descriptive text extracted from the document, and file it directly into almost any downstream legal document management system. In compliance with a firm’s regulations, it can even notify the relevant attorney based on the type of document. Mid-sized insurance defense companies have reported over 350% increases in document intake efficiency and hundreds of thousands of dollars in annual savings by using AI to manage document intake.
“With the help of Extract Filer, we have been able to create a highly efficient centralized mail system where one or two people can accurately handle duties that previously required multiple staff and legal assistants across our California offices,” said Amy Haverlah, staff administrator at the mid-sized workers’ compensation defense firm Floyd Skeren Manukian Langevin, LLP. The benefits of an AI-powered legal document intake system go beyond cost savings and increased productivity. Operations personnel can handle incoming document processing remotely using Extract Filer by using a single, secure web-based user interface. Additionally, it gives managers the resources they need to keep an eye on remote employees and determine their productivity levels. Attorneys may identify required documents in their DMS quickly when they are appropriately labeled and filed. Additionally, since every file has been OCRd to enable search capabilities, attorneys can swiftly search document contents to find what they need.
AI-Powered Solutions Will Make Responsible, Successful Businesses Possible The legal industry advanced by ten years as a result of the worldwide epidemic, and the most creative companies are implementing AI technology in line with their strategic goals. AI-powered document intake and other AI-driven technologies offer ways for today’s high-volume litigation practices, such as insurance defense and civil litigation businesses, to enable remote operations, reduce overhead expenses, and free up hours for additional high-value work. These technologies bring modernity to the operations of litigation businesses without sacrificing the quality of the legal work that attorneys enjoy and that customers are ready to pay for.
Co-founder and CEO of Foundation AI, which creates Extract Filer, an AI-powered document intake system for legal and insurance organizations, is Vivek Rao. In a previous life, Vivek worked for several years in insurance defense. He was also the general counsel of Enlightiks, an AI and predictive analytics startup that was purchased in 2016. He received his JD and MBA from UCLA, and his B.S. from the University of Southern California.