In 2005, the 700-lawyer department of insurer Allstate Corp. slashed its roster of outside law firms from 400 to 13. An article touting Allstate’s success, in Corp. Counsel, Vol. 14, May 2007 at 98, states that “preliminary e-billing figures show that Allstate’s average cost per matter was down last year by roughly 6%, at a time when most law firms are raising prices.” Not too shabby, especially in light of the typical increases in billing rates by law firms of 4-6 percent each year (See my post of March 11, 2007.).
The statistician in me wants to know the median cost per matter and whether the statement applies to hourly billing rates or to total costs of matters, which includes disbursements. Was the previous year a fair comparison, or did it have a monster case that drove up the average? Do the savings encompass invoices not processed through Allstate’s e-billing system? And, to pile question on question, can convergence take credit for the savings or did the law department demand billing rate discounts from its remaining firms?