Why All Personal Injury Lawyers Charge The Same Fee (and it hasn’t changed in decades)

During our years working in personal injury, one question has consistently puzzled us at Mighty. Why do personal injury (PI) lawyers all charge roughly the same high rates?

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Nearly across the board, PI firms charge 33.3% of the total case settlement or more — even if your case settles pre-lawsuit — and they have done so since the 1970s. What’s more, the cost of doing business has gone down during that time period. Thanks to innovations in cars, medicine, and the legal industry, personal injury lawyering is easier and less expensive today than ever before. At Mighty, we want to start an industry wide competition on price, and are working to translate recent innovations into a more affordable, holistic experience for people injured in accidents — so why isn’t anyone else? 

After years working with PI law firms, here’s our best guess on why PI law firms don’t compete on price – they don’t get more business when they charge less. Put differently, the demand for PI representation is price inelastic — changing prices doesn’t affect demand for PI services very much. Regardless of small deviations in the rates PI lawyers charge, they can expect to sign over 70% of potential clients they deem qualified, based on our internal data. Why is the industry so price inelastic? We’ve identified four reasons.

The “pay later” psychology: Personal injury lawyers are paid on contingency (meaning they only get paid if you win). Because the lawyer receives nothing upfront, the injured party feels less motivated to negotiate on price since it feels far away and contingent. 

Misleading promises: To get more business, personal injury lawyers exacerbate this ‘pay later’ psychology by inflating injured people’s expectations about how much money they’ll pocket. They entice potential clients with huge total settlement numbers, but neglect to explain that the total settlement isn’t what the injured person actually gets to keep. In fact, they don’t even get the total settlement minus the lawyer’s fee. This is because medical costs, financing costs, case expenses, and more all get subtracted from the client’s share of the winnings (not the lawyer’s share). After all these deductions, the injured person may even receive less money than their lawyer. 

Uninformed consumers: Most people enter the labyrinthine world of PI with no prior experience. Over-promising to clients is just one way PI lawyers exploit—and perpetuate—this lack of knowledge. Across the board, standards for transparency in the PI industry are abysmal: personal injury law firms rarely publish their rates online or explain their fee structure to clients. After all, why publish your rates when nobody else is? Why improve transparency when confusion helps your bottom line? By keeping people in the dark, PI law firms limit consumers’ ability to shop for better value, and this keeps prices high. 

Equating cost with quality: The injured party sometimes makes the mistake of equating cost with quality. If a lawyer is charging below-market rates, maybe that’s a sign he’s (it’s almost always a he) not the best person for the job. Though understandable, this kind of thinking is misplaced in PI, a commoditized market where businesses all offer essentially the same services, especially for cases that don’t go to trial. 

Though price inelasticity is the main reason for high prices in PI, it doesn’t tell the whole story. Personal injury law firms can also display cartel-like behavior, acting in their collective interest to keep prices up. At Mighty, we’ve heard stories of law firms that were ostracized and threatened by other PI lawyers for marketing lower rates. For decades, PI has thrived by remaining costly and opaque, and this makes anyone who seeks to challenge this status quo a threat to the entire industry. 

Because of price inelasticity and this pattern of shady practices, PI law firms today don’t even bother to compete on price or the scope of services they provide. Instead of offering clients better value, they rush to buy up more air-time, eyeballs, and billboard square footage than their competitors. If personal injury firms competed to better serve injured people, PI rates would be a fraction of what they are today.

If you've been involved in an accident and are seeking legal support and representation, head over to Mighty's Accident Lawyers Directory to find a trusted attorney in your area today.

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