Alternative fee arrangements (AFAs) are currently a hot topic with both claims professionals and defense counsel.
Defense lawyers that are truly capable of partnering with claims departments understand the need for—and benefit of—flat fee and tiered fee arrangements. When compared to the traditional billable hour, they can be beneficial to claims departments and defense counsel if they are used in the right situations and with the right kind of claims.
While the traditional billable hour will almost certainly be the mainstay for hiring defense counsel, AFAs create certain incentives that hourly arrangements do not. When used appropriately, they can help keep defense costs down and reduce time to resolution, while still being attractive to defense counsel who can handle certain claims efficiently. AFAs work because they create incentives for both defense counsel and claims professionals that result in good performance in claims handling.
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