Legal Bill Review leader LSG (Legal Solutions Group) has coined the “deterrence effect” in legal bill review as part of the ROI calculation for enterprise legal management software. It simply indicates that vendors, law firms, and non-legal professional services firms are barred from overbilling their clients by the presence of a legal bill review provider. While legal bill review derives client savings through non-compliance codes, the deterrence effect, among other subtle drivers of ROI, are less immediately tangible to clients.
LSG has endorsed the value of the “deterrence effect” in legal bill review. It states that if they find many errors in vendor bills and help their clients save 20% per annum in the first 2 years of working with them. Then their vendors start submitting more compliant bills after realizing that LSG will mark down in their bills if they are not compliant. The term is gaining traction during this time of upheaval and transition post-COVID-19, where claims are rising, and the average ROI on ELM software is 7-8x. To note, with a 1% cost of legal spend for LBR, LSG is offering an additional 3-4x of ROI relative to larger competitors, like BottomLine and Wolters Kluwer.
For example, if legal bill review savings each year are 5%, a drop off from the earlier years of harvesting low-hanging fruit, then the deterrence effect is the 15% saving that is not currently being found. It would likely be found in the bills after the turning off legal bill review.
LSG was founded in 2004 to scale in-house legal departments, insurance companies and third party administrators. The legal products offered by the company are based on technology that can generate return on investment through automation, bill review savings and more subtle ROI points, such as the deterrence effect. It facilitates AI-enabled legal bill review and ELM Software solutions so that companies can focus on front office activities. Over the last 15 years, LSG has operated in 50 countries to help its clients save $1.2 billion dollars in total.
The goal of this term is to help the insurance and enterprise industry to understand the value of ELM software and LBR, even with only 3-4% savings per annum. A LSG spokesperson has added that LSG’s cost is 1% of each bill, and clients would still see net savings of 2-3% in the long-term despite their starting saving value of over 20%.
The idea of the deterrence effect in legal bill review is to identify areas where businesses are wasting time and reducing these instances through cloud-based legaltech software.