July 2025 Newsletter: Legal Industry Risk Transformation

The legal profession has undergone a dramatic transformation, with 2025 marking a pivotal year for how law firms approach technology, risk, and business strategy.

In light of AI and smart technology’s explosion, legal professionals have emerged with newfound confidence and strategic clarity. This shift represents more than incremental change—it signals a major shift in how successful law firms operate in an era of rapid transformation.

In this month’s newsletter, we’ll explore the key findings from our newly released 2025 Legal Industry Risk Index, based on insights from 245 full-time legal professionals across the United States. From the dramatic surge in AI adoption to the complete reordering of internal risk priorities, these findings reveal an industry that has found its stride with emerging technologies, and is confidently charting a bold course forward.

The data tells a story of strategic evolution, where technological adoption, comprehensive risk management, and protective planning are working together, not competing for attention.

Let’s dive into the findings.

What’s going on?

AI adoption skyrockets in legal industry — Embroker 2025 Legal Risk Index | Legal professionals have officially gotten their “AI sea legs,” with reported usage surging from just 22% in 2024 to 80% in 2025. This, and more data on risk management strategies and insurance coverage, reveals an industry in confident transition.

Reputational risks can overshadow ransom in cyberattacks, Aon says — Insurance Journal | According to Aon, reputational risk can cause shareholder value to fall by an average of 27%, and reputational risks are nontransferable. Read more in Aon’s Global 2025 Cyber Risk Report.

Lawyers hit turning point on AI — Above the Law | The legal industry’s relationship with risk has fundamentally changed, with 37% of professionals now viewing risk as a growth opportunity—more than double the 18% who held this view just one year prior. This confidence shift is enabling bolder business strategies and technological innovation.

The risk transformation: How legal professionals reordered priorities

The legal industry’s approach to risk management has undergone a big transformation, with new challenges emerging while traditional concerns have normalized.

Key shifts 

• Internal risk priorities have shifted dramatically from financial pressures to reputational and employment-related concerns 
• External threats now center on disruptive technology adaptation and professional liability rather than economic volatility 
• Inflation concerns dropped from 52% to 28% as a primary worry, indicating normalization of economic uncertainty

The new risk landscape

Internal challenges taking center stage: 

• Reputational risks from public controversies tie for #1 concern at 47% 
• Employment-related claims match reputational risks as top priority 
• Struggles managing remote or hybrid workforce operations rank as a significant challenge at 39%

External threats evolving rapidly: 

• Disruptive technology adaptation leads external risks at 53% 
• Professional liability threats rank as #2 external concern at 51% 
• Cybersecurity breaches maintain significance at 40% of responses

Industry insight: The shift from purely financial concerns to reputational and operational challenges suggests legal professionals are operating from a more stable economic foundation, allowing them to focus on strategic growth and risk management rather than survival-mode financial planning.

The insurance awakening: Strategic protection enables innovation

Legal professionals have dramatically transformed their approach to insurance coverage, viewing protection as a strategic enabler rather than a necessary expense.

Key shifts

• 45% of legal professionals are upgrading their insurance policies, up from just 14% in 2024 
• 77% now express confidence that their coverage addresses their greatest business risks 
• Cyber insurance has shifted from optional to essential, with uncertainty about coverage dropping significantly

Strategic coverage approach for law firms

Proactive policy enhancement: 

• Request twice-yearly comprehensive coverage reviews to identify gaps in protection 
• Evaluate policy limits against current business operations and growth plans 
• Build out comprehensive guidelines for AI-use, remote work, and digital operations

Confidence-building measures: 

• Verify that coverage keeps pace with technological adoption and new service offerings 
• Ensure employment practices liability coverage addresses hybrid workforce challenges 
• Review cyber insurance limits in light of increasing threats

Implementation strategy: 

• Create centralized documentation systems for all insurance policies and endorsements 
• Establish regular coverage and guideline review schedules aligned with business evolution 
• Evaluate insurance providers’ knowledge of the legal sector, risks, and specific challenges

Risk management insight: The 77% confidence rate in current coverage suggests legal professionals are taking a more strategic approach to insurance purchasing, viewing comprehensive protection as the foundation that enables them to pursue growth opportunities and technological innovation with greater security.

The future of legal risk management: Strategic integration

The legal industry’s risk management evolution points toward a more sophisticated integration of technology adoption, strategic planning, and comprehensive protection.

Emerging trends: 

• AI governance frameworks are becoming standard practice for managing professional liability exposure 
• Risk assessment processes increasingly incorporate reputational and employment-related factors 
• Insurance purchasing decisions align more closely with strategic business planning cycles

Strategic considerations: While technology continues to reshape legal practice, the fundamental principle remains unchanged: successful firms understand that embracing innovation and protecting against risk aren’t competing priorities, but complementary strategies that work together to enable sustainable growth and competitive advantage.

What’s new from Embroker?

Upcoming events, stories, and more

Legal Risk Index driving industry conversations

Our comprehensive survey of 245 legal professionals is generating significant discussion across legal publications, including Law.com, Solicitors Journal, Law360, Above the Law, and more.

AI in Legal Practice Webinar Now Available On-Demand

Our recent webinar with Reminger Law Firm and Everest is now available on demand. Watch Rafael McLaughlin and Rob West break down the AI tools law firms are using, the risks to watch out for, and real cases of malpractice.

AI in Legal Practice, 2025: A deep dive

Based on the findings from our 2025 Legal Industry Risk Index Report, we break down the numbers, talk tactics, and offer best practices for managing AI for lawyers in our most recent blog.

Like what you’re reading? Check out the Embroker Blog for more insights on legal industry risk management and strategic insurance planning.