Injury claim referral fees to be banned

Car dented after accident in Norfolk Despite a fall in road accidents involving personal injury, claims have doubled in the past decade

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The government is to ban referral fees in personal injury claims in an attempt to curb the "compensation culture".

It says the current system in which personal injury details are sold on by insurance companies to lawyers has led to rising insurance costs.

Justice Minister Jonathan Djanogly said honest motorists were seeing their premiums hiked as insurers covered the costs of ever more compensation claims.

The Association of British Insurers said the ban must be "watertight".


Mr Djanogly said: "Many of the claims are spurious and only happen because the current system allows too many people to profit from minor accidents and incidents.

"Referral fees are one symptom of the compensation culture problem and too much money sloshing through the system.

"People are being encouraged to sue, at no risk to themselves."

He said the ban, applied in England and Wales, would make claimants think harder about whether to sue, and give insurers an incentive to pass the savings on to customers.

Nick Starling, of the Association of British Insurers: ''Everyone has seen their premiums rise''

"It's certainly a racket. It's a sick culture that we have to turn round."

There is no current timescale for implementing a ban.

The government is already planning to stop losing defendants having to pay a "success fee" to reimburse the claimant's lawyer for unconnected cases he may have lost.

It says the proposals before Parliament mean people making the claim will have to pay the success fee - which will be capped - rather than the defendant.

Legal costs overall will fall which means lower costs to pass on to customers, it adds.

The news had a negative impact on shares of leading car insurer Admiral on Friday, cutting 5% off their value early in the day.

Admiral does not sell customer data, although if one of its policyholders suffers an injury in an accident which was not their fault it will put them in touch with legal help.

It said referral fees accounted for around 6% of its UK car insurance profits.

The Association of British Insurers - which speaks on behalf of leading insurers - said it welcomed the announcement.

Underground fears

Start Quote

They are bribes and add an unnecessary cost to litigation.”

End Quote Peter Lodder QC Chairman of the Bar

Director General Otto Thoresen said: "We are very pleased that the government has listened to the insurance industry's campaign for a ban on referral fees.

"They add no value and encourage spurious and exaggerated personal injury claims.

"It is important that the ban must be watertight and apply across the board.

"Banning referral fees is an important first step in tackling our dysfunctional compensation system, and needs to be accompanied by a reduction in legal costs and action to tackle whiplash if honest customers are to benefit from these reforms."

Chairman of the Bar, Peter Lodder QC, said referral fees had "no place in a fair and open justice system".

"They are bribes and add an unnecessary cost to litigation."

The Association of Personal Injury Lawyers vice-president Karl Tonks said there was a concern that a blanket ban could push the transactions underground.

"The really important thing is for there to be transparency, so that the injured person, the consumer knows what's happening and their details are only passed on to anybody with their express consent."

He said his members would welcome a ban on accident victims being approached to make claims by cold-callers.

"Solicitors are robustly regulated in this, we simply cannot and do not do it. Others are not so well regulated."

However, the Claims Standards Council, which represents claim management businesses, said the proposals will have "no impact whatsoever on the issues that concern the public like data protection and cold calling, unsolicited text messages or insurance fraud".

Chairman Darren Werth said: "Those involved in helping claimants access justice do not like these abuses any more than the industry's worst critics."

With Access for Justice Action Group, it proposed making insurers justify their fees to a regulator, prohibiting approaches to a claimant without permission, and banning financial inducements in adverts just for making a claim.

Universal definition 'lacking'

Shadow justice minister Andy Slaughter said Labour supported the ban, particularly when applied to road accidents, but had some reservations.

"It is strange that the Ministry of Justice is seeking to ban all referral fees when the government themselves admit that there is no universal definition of what constitutes a referral fee."

Mr Djanogly said finding a definition was "challenge" for him, but he was hoping to get it included in the legal aid bill, possibly by Easter next year.

Meanwhile, the Office of Fair Trading said it was putting motor insurance under the spotlight after drivers had seen premiums rise by 40% on average in a year.

In 2009, the number of road accidents involving personal injury was 31% down on the average for 1994-98.

But the cost of personal injury claims has doubled from £7bn to £14bn in the past decade and motor insurance premiums have risen at least 30% in the last year.


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  • rate this

    Comment number 315.

    I got knocked off a cycle years ago before compensation culture was a reality, by a drunk driver as I rode past he pulled out of a parking space & I went flying & ended up accross other side of road, knocked out for few moments, bike smashed, clothes ruined, & few scrapes & what I thought were minor injurys.
    Received comp, not much & knee injury actually affects me to this day

  • rate this

    Comment number 314.

    I am fed up with receiving unsolicited calls and texts to my mobile phone reminding me "I haven't claimed for that accident I had".

    It doesn't stop when I ask it to, so now I generally reply with "I haven't claimed because I was (doing naughty things to) your mother. I will get around to it later......"

  • rate this

    Comment number 313.

    I had a no fault accident in Feb 2009 (I was stationary and was reversed into). Minor vehicle damage and absolutely no injury to either party, as it was at parking speed. Yet suddenly last month (30mths on) I get e-mails, texts and a phone call inviting me to make an injury claim. This is disgusting - and I let my feelings rip at the poor so and so who phoned me.
    Stop the 'ambulance chasing' NOW.

  • rate this

    Comment number 312.

    Mrs clips a SOLICITOR in a BMW causing minor damage and 3 months later our renewal was nearly £2000."

    Was this a solicitor named "Mrs Clips" who drove BMW, or was it your missis who clipped a BW driven by a solicitor? ;-)

  • rate this

    Comment number 311.

    Ah: an HYS that you can actually have your say on, seeing as the disablilty PC debate and myth of free wi-fi one were only open for about 2 minutes and you couldn't comment on the Obama plan anyway. So here's my take on this topic: if a ban comes in then what are all the people in the industry going to do for work? They are obviously incapable of doing proper jobs and can't all become golfers. .

  • rate this

    Comment number 310.

    I get the idea behind injury lawyer claims, and in some cases the work they do is valid.

    But after my car crash which had been settled and paid I still had them calling me asking if I wanted to go to court and make a claim for my injuries. I wasn't hurt, except cuts and bruises so felt no need to go to court.

    They are still bothering me a year on.

    They are a bunch of ambulance chasers!

  • rate this

    Comment number 309.

    Opposite how?"

    Arguing the HR laws should be repealed or replaced due to the (allegedly) perverse decisions of our courts. I may be mistaking you for others, in which case apologies (with no admission of liability including, without limitation, damage for loss of business or loss of profits).

  • rate this

    Comment number 308.

    I was receiving a text saying "Text CLAIM to receive £3000 for the accident you had".

    Obviously in this cynical world I knew it was rubbish and ingnored it. However, one day I found myself in a rather irratable mood and text CLAIM.

    A gentle man rang me and asked about my "accident", I informed him that to my knowledge I have not had an accident but apparently his company knew better.

  • rate this

    Comment number 307.

    @274 pb: "Your risk group determines base premium. The Ins Co reflects no accident record by reducing premium as a reward (they are underwriting same base risk for less money) . Have an accident and your risk is effectively reassessed and the Ins Co also wants the full premium."

    Isn't that what the NCD is for?

  • rate this

    Comment number 306.

    The worst thing ever done was to allow Solicitors to advertise. From that moment we were swamped with 'Have you had an accident - you can claim money' adverts. This opened the doors to thousands of fraudulent claims and the cost of insurance sky rocketed as a consequence. Time to stop the advertising for lawyers.

  • rate this

    Comment number 305.

    Fact is, lets see if BBC publish/remove this factual comment -

    is that certain areas of certain high ethnic populations have many more claims than other areas.

    Some have a high number of same family claims on singular & multiple occassions, many are fraudulent claims

    These claims can be more than tripple the national average , hence why certain post code areas have extortionate premiums.

  • rate this

    Comment number 304.

    2009, comprehensive insurance for husband & wife, both over 40 driving a VW Passat was £800.
    Mrs clips a SOLICITOR in a BMW causing minor damage and 3 months later our renewal was nearly £2000. this was our 1st claim in 6 years.
    The insurance industry is a joke itself. It pulls figures out of thin air rather than actually looking at the risk.

  • rate this

    Comment number 303.

    Before forming any opinion either way in this matter it is only right that people are aware of the facts. I have worked in this industry for 17 years (both sides) It is the insurer who drives the system as they refer cases to solicitors and charge around 1200 per case. Solicitors on average charge 1350 in profit costs, do the maths, we generate £150 per case to include paying overheads.

  • rate this

    Comment number 302.

    Mr Max
    Also a sound point. See that one.

  • rate this

    Comment number 301.

    These small business do not have any speciality in dealing with personal injuries and/or road traffic accidents. Still the number of companies keep on increasing day by day and the reason is obvious. They receive on average £650.00 per claim. I believe its the easiest way to earn money.

    Find two parties match them together and make a fraudulent claim. As easy it gets.

  • rate this

    Comment number 300.

    The insurance racket & fraudulent compensation claims dispell any notion that bankers & politicians are alone in their greed & getting away with as much as possible.

  • rate this

    Comment number 299.

    I was knocked off my bicycle by a car a few years ago, fortunately I only suffered minor injuries but the bike was written off.

    The driver came to my door the following morning with an apology, very concerned as to my well being. I said that I wanted the bike replaced (£400), I never heard from her again.

    After 2 years I got £4K through injury lawyers so my experience was wholly positive.

  • rate this

    Comment number 298.

    Opposite how?

  • rate this

    Comment number 297.

    My understanding is that part of the reason motor and home insurance is so costly, is because it is global, and the rest of the world is subsidising huge claims in the US. These might be for asbestosis, but also for the astonishing awards for trivial injuries, such as scalded lips from takeaway coffee. Yet another scam to make cash flow one way. I think the US judiciary are complicit.

  • rate this

    Comment number 296.

    I am living in the united kingdom since October 2009. During these three years I have noticed that UK government is extremely lenient when it comes to road traffic accidents and car insurance industry. There are thousands of accident management companies who do nothing but making fraudulent accidents. Most of them can easily be tracked provided that government spend little to prevent a bigger loss


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