Pre-Paid Legal

[Paul Altman <paulha@xxxxxxxxxxxxx>]

Folks:

In my latest dealings with yet another salesman promising me something for 
nothing, I've been approached by a Pre-Paid Legal (NYSE:PPD) 
salesman.  This is yet another annoying multi-level-marketing scheme, in 
this case to provide legal insurance to the masses.

Naturally, I've been unable to get them to give me a simple, horsey and 
duckey, explanation of their business model.  Mostly the pitch is that 
"everyone else except you is buying legal insurance, and it's terribly 
exciting."  The only substantive info I've been able to get is that it's 
$26/month, and that approx 1/3 goes to the salesmen out in the MLM tree, 
1/3 goes to corporate, and 1/3 goes to the law firm.

My question:  why would any law firm be willing to lay off all of PPD's 
insurance risk, for a mere $8.33/month?  Sure, some customers will go 
months or years before using the service, but it wouldn't require much 
customer time, for a law firm to go broke.

And if it's such a great business for the law firms, why don't they fire 
PPD and pool together to create their own competition to PPD?

I just don't get how this business works.  Any comments?

      Paul