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It's the HMO model where the doctor is paid a capitation fee and has an
incentive not to treat you - take an aspirin and call me in the morning.
What makes it possible is that both the doctor and the lawyer are
professionals, so they know what needs to be done *and you don't*.
The following concept will clear your mind:
When you call your fee for service lawyer, he sees you as a profit center,
he hears the cash register ringing, and assuming you need something done, he
will gladly do it (of course, you may hate paying him).
When you call your pre-paid lawyer, he already got your (meager) capitation
revenue and you look to him very much like a cost center. Unless he is
Mother Teresa, he will have a *slight bias* toward under-providing services
(spending his time on you). The wonderful thing about law is - there are
all these forms books, and you only have to push a button.
Please note that I am neither a lawyer nor a doctor, just understand the
economics and psychology involved.
----- Original Message -----
From: "Paul Altman" <paulha@xxxxxxxxxxxxx>
To: <omega-list@xxxxxxxxxx>
Sent: Monday, March 25, 2002 7:23 PM
Subject: Pre-Paid Legal
> 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
>
>
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