What is AI's impact on the legal sector when it comes to cost implications, client expectations and future possibilities?
The legal industry, known for its reliance on accuracy, large volumes of data, and extensive documentation, is particularly poised for AI-driven transformation. Although the sector is steeped in tradition, even the most established practices are turning to artificial intelligence and automation as a way to elevate their services.
As we look to 2025 and beyond, AI remains a powerful ally that is set to reshape how legal professionals work, strategise, and serve clients.
The Rise of Generative AI in Law
AI and automation technology has already been quietly enhancing the back-office operations of law firms for years. But with generative AI, we’re entering a whole new era. From drafting and monitoring contracts to summarising complex information, gen AI is now capable of producing work that previously required hours of human expertise.
Imagine the labour-saving potential: AI can produce memos, draft briefs, ideate and brainstorm, review invoices, and perform due diligence. The time spent on each of these tasks shrinks dramatically, freeing up legal professionals to focus on the strategic work they actually enjoy. While AI won’t replace lawyers anytime soon, it’s definitely here to enhance their expertise and make their work life easier.
A prominent voice in the industry, Macfarlanes’ Tart-Roberts, emphasises, “AI is certainly not about replacing lawyers, but we are going to see it turbo-charging their expertise.” Law firms that embrace this evolution will position themselves as more efficient, more responsive, and ultimately more competitive.
Key challenges with AI adoption in law
Of course, with great power comes great responsibility – or in the case of legal organisations, great risk. Adopting AI in the law sector isn’t all smooth sailing, firms must navigate a vast range of concerns, from security risks to issues of accuracy.
Data Privacy and Security Risks
One of the biggest fears about generative AI in the legal sector is the risk of data breaches. Using public generative AI tools often means sharing sensitive data with a third party, a risk many firms aren’t willing to take. As Bunmi Tandoh, an in-house solicitor at the London Borough of Enfield, puts it, “Without specific training, oversight, and grounding in appropriate content, the technology can leak confidential data and construct biases.”
The solution? Trusted AI models designed with robust security in mind. Many law firms are now opting for private, “closed” generative AI systems that are trained solely on secure, verified legal datasets.
Accuracy Concerns and Hallucinations
In the legal field, providing incorrect information to clients is a big no-go and carries the risk of causing serious damage. But generative AI, while powerful, can sometimes “hallucinate” (produce inaccurate or misleading content). This is understandably a huge concern for legal professionals, with a recent survey showing that 57% of respondents cite content hallucinations as a big barrier to adoption.
To combat this, some firms, like DWF, are choosing to use AI models that are exclusively trained on trusted datasets, reducing the risk of hallucinations and ensuring more reliable outputs.
Client Transparency Expectations
Clients increasingly expect to be informed when AI is involved in legal work, 85% of them, in fact, according to recent research. This transparency isn’t a nice-to-have option, but rather an ethical obligation for responsible service providers. Firms that proactively communicate their usage of Artificial Intelligence and automation software can build trust and enhance their reputation, while those that fail to inform clients risk damaging their credibility.
Moving Towards Trusted AI Models
Given these risks, it’s no wonder the legal sector is exploring “closed” or proprietary AI models. These tools are trained exclusively on legal source material and are available only to subscribers, which adds a layer of security and reliability that public models fail to offer.
Using closed models means law firms can better control the accuracy of outputs, reduce the risk of data breaches, and ensure that any biases in the data are minimised. This is likely the direction we’ll see legal AI move in the coming years, especially for firms handling sensitive or high-stakes information.
AI’s Economic Impact on Legal Services
Alongside operational improvements, AI is poised to influence the financial structure of legal services, with potential cost savings for both law firms and their clients. In-house teams are increasingly expecting cost reductions as a result of generative AI – 52% of respondents in one of the latest LexisNexis surveys said they’re expecting bills to drop. However, law firms aren’t entirely on the same page; only 40% agree that costs will go down.
This discrepancy raises an interesting question: Will AI ultimately lead to lower costs for clients? In-house legal teams are putting pressure on law firms to adjust their billing practices in light of AI’s efficiency gains. In fact, nearly two-thirds (62%) of in-house legal teams expect law firms to revise their pricing structures.
Some law firms are hesitant to make these changes, but it seems likely that client expectations will drive innovation in pricing models sooner rather than later.
Practical Applications of AI in Legal Workflow
As AI continues to shape the financial and operational landscape of legal services, law firms are already seeing tangible benefits in everyday workflows. Some standout applications are:
- Due Diligence: AI-powered tools can swiftly review contracts and flag any anomalies, making the due diligence process faster and more thorough.
- Contract Drafting and Review: Generative AI can draft and analyse contracts, identify risks, and suggest improvements, making this once-manual process significantly more efficient.
- Document Summarisation: AI tools can summarise lengthy legal documents in seconds, making it easy for lawyers to stay informed without getting bogged down in the details.
These key applications allow legal teams to focus on high-value work, such as advising clients and developing case strategies, rather than getting stuck in endless piles of paperwork.
As AI adoption becomes the new normal, law firms that embrace these advancements will not only improve efficiency but also gain a critical edge in a highly competitive industry.
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