AI: Continuing concerns
A lack of digital skills across the UK could be a risk for consumers and law firms if lawyers “do not fully understand the new technology that is implemented”, the Solicitors Regulation Authority (SRA) has warned.
The regulator also advised that law firms “should consider the risks of overreliance on third-party IT providers” in providing cybersecurity.
The SRA said law firms were “increasingly adopting new technologies such as business intelligence services, and hiring more data scientists” to gain insights into performance.
“Firms are accelerating in their adoption and use of generative artificial intelligence (AI), particularly in larger firms and with a focus on back-office efficiencies.
“However, despite this increased interest in new technology, there remains a lack of digital skills across all sectors in the UK. This could present a risk for firms and consumers if legal practitioners do not fully understand the new technology that is implemented.”
In its latest Risk Outlook report, Serving clients’ needs in a changing legal market, the SRA said: “Solicitors are reported to be increasingly eager to use AI, mostly for automating time-consuming tasks, such as legal research and drafting legal documents and communications.
“However there are continuing concerns regarding the accuracy of outputs and data security.”
On cybersecurity, the regulator said that, given the impact of cyberattacks, law firms “should consider the risks of over-reliance on third-party IT providers, as well as carefully managing the risks when replacing old manual or digital systems with new systems”.
This included “having continuity plans in place, including back-up systems, so that you can continue to provide a service to clients”.
With virtual meetings increasing, law firms should ensure taking “appropriate precautions” to avoid data being “hacked or captured whether working at or away from the office”.
The SRA predicted that, partly as a result of technology, the way that legal work was billed could “significantly change”.
In particular consumers were demanding “better pricing transparency, which some alternative pricing models can provide, as well as cost predictability”.
Meanwhile, increasing use of AI could speed up tasks that would usually be billed by the hour.
“More UK and international firms are considering flat fees, hybrid fees, contingent fees and subscription-based models.”
The SRA said any firm which changed its pricing or fee arrangements, would have to make sure it complied with the transparency rules.
On mergers and acquisitions, the SRA said law firms “with external funding and a clear strategy” would be in demand.
“We are taking a particular interest in consolidating firms and are urging them to be mindful of the credentials of takeover firms, as well as of their own responsibilities.
“Firms must make sure they protect the client appropriately when considering a structural change to their business.”
On the high-volume claim market in the wake of the collapse of SSB Law, the SRA said that although still in the early stages, its investigation had “already uncovered a wide range of issues in this area”.
As mentioned by SRA chief executive Paul Philip in an article for Legal Futures on bulk litigation last November, these issues included claims without merit, lack of work supervision, poor accounting records and evidence of ‘cold calling’. It emerged in December that over 50 law firms are being investigated.
On the market as a whole, the SRA commented: “It is an uncertain time in the legal sector, with new opportunities and challenges in all areas of law.
“Financial difficulties for many individual and business consumers have increased and most are demanding that firms are as efficient and transparent as possible.
“Firms have been adapting to this changing environment in creative and innovative ways, some of which could benefit solicitors and consumers alike.
“However, change and innovation also bring risks, and firms must ensure that both they and consumers are protected appropriately, and that they are keeping pace with regulatory obligations.”
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