Over the past couple of years, there have been many interesting Big Data legal projects where information is used for predictions around litigation. Additionally, some companies commission surveys of their customers to identify consumer trends. Earlier this spring, LegalShield publicly launched the LegalShield Law Index project, using our provider law firm data to create five indices that leading indicators of the U.S. economy. It’s a great example of how your core business data can be the foundation for external analysis or predictions, adding value and opportunity to your business.
As a 45-year-old start up providing legal services and identity theft protection, we have served millions of American consumers and over one hundred and forty thousand businesses. We have tracked member legal requests as “intakes” for over 15 years. We asked ourselves, “Does the legal needs of our members with our provider law firms signal a shift in the U.S. economy?”
We were able to mine our database of actual member demand for and the usage of legal services in about 70 different categories of the law that include the above plus other areas such as bankruptcy, contract, intellectual property, and probate. Understanding the needs of our members is obviously important for the delivery of pre-paid or subscription legal services, however, we realized that the same information signals economic trends.
We were able to use the past 15 years of data from consumer and business requests to create five indices:
- Consumer Financial Stress Index
- Housing Activity Index
- Bankruptcy Index
- Foreclosure Index
- Real Estate Index
These five areas encompass more than 70 percent of the U.S. Gross Domestic Product. As our Chief Commercial Officer James Rosseau commented when the indices were first made public in May 2017, “The LegalShield Law Index provides actionable intelligence about the direction of the U.S. economy in the mid- to near-term.”
The above indices are leading economic indicators and we release the information on a timelier basis than other traditional indices. The ‘flagship’ Consumer Financial Stress Index leads the Conference Board’s Consumer Confidence Index by anywhere from one to three months. For example, our May 2017 results had predicted a consumer confidence decrease based on the hard data from our members when other soft indices were still showing an upward trend. The September and October results show a continued worsening in that same consumer financial stress index.
Our LegalShield indices have been validated by statistical testing under the supervision of a PhD economist. Our CEO Jeff Bell recently outlined some best practices around data collection and protection in an article titled “The Wisdom of Data.” It’s been interesting to view client or member data as providing the wisdom in our industry where the lawyers are usually thought of as the knowledge providers.
Data itself must be clean to produce meaningful analysis. It may seem obvious to follow privacy laws and any statutes, yet some companies have been cited for improper data usage. Also, it’s prudent to physically separate your operational client data from the analytics. Planning is necessary to create both data and relevant analytics plus avoiding any liability.
While LegalShield’s core business is not economic forecasting, we wish to share the wisdom of our data by releasing the Law Index on the sixth business day of every month. The latest October data is available here, along with an assessment of what the results suggest about the health and future of the U.S. economy. If you are interested in our project or big data in general, please reach out to me on Twitter.