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A Window Into Legal Pre-Paid Services

This New York Times article, Why Short Sellers Want to Crash the Tupperware Party (11/13/06), offers an interesting window into how Pre-Paid Legal services plans are sold. Contrary to what you might think, Pre-Paid Legal services plans aren't sold by individual attorneys or law firms but through multilevel marketing schemes used by Avon, Tupperware, diet pill vendors and knife salesmen. Recently, the Federal Trade Commission (FTC) issued new rules to regulate these companies' hiring practices, requiring them to disclose their salesforces' average earnings as well as the amount of time a sales rep typically lasts with the company (most don't stay on more than a few months).   

The article details Pre-Paid Legal's sales techniques:

To understand short sellers’ enthusiasm, consider Pre-Paid Legal, a public company that sells legal insurance through multilevel partnerships. For about $26 a month, Pre-Paid Legal lets customers consult an affiliate lawyer on legal matters like speeding tickets or writing a will. In 2005, the company’s nearly 500,000 sales representatives brought in revenue exceeding $423 million.  But like many multilevel marketing companies, Pre-Paid Legal suffers from high turnover. In 2005, the company replaced at least 50 percent of its active sales force, according to filings with the Securities and Exchange Commission.  Industrywide, multilevel marketing companies typically replace almost all of their sales representatives every year.

Clearly, if individual lawyers tried to use the same marketing techniques as Pre-Paid Legal, the bar would crack down on them. Perhaps that's why Pre-Paid Legal has few competitors in the way of lawyers or law firms who develop and market pre-paid plans. And if these regulations will impact Pre-Paid Legal, as observers predict, perhaps there will be opportunities for lawyers to capture the markets that Pre-Paid Legal once served.

Posted by Carolyn Elefant on November 15, 2006 at 03:07 PM | Permalink | Comments (27)


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