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 375.

    The 'compensation' culture is a bit of a myth, a few high-profile news stories & everyone thinks we are all at it.

    I have seen the court cases for industrial accidents. In almost every case where an injured person has receieved compensation the amount awarded was reduced by 80-90% because of the injured person contributed to THEIR injury. Court awards £100K IP recieves £10K!

  • rate this

    Comment number 374.

    I work for an accident management company and we pay referral fees to companies like bodyshops and insurance brokers! The reason people prefer to go through companies like ours is because insurers like aviva will make there customers pay their excess even if its none fault and double their excess if the customer wants to use there own garage, therefore forcing them to go elsewhere.

  • rate this

    Comment number 373.

    357.Dragonray - "Not always the case, chap"

    That's the problem with these debates - generalisation. Not all cases are fraudulent but very many are. The problem is that you, as a genuine case (I appluad your sttitude to recovery), get tared with a very mucky brush which is unfair.

  • rate this

    Comment number 372.

    Apart from lack of Data Protection by insurers, there is the huge proliferation of organised gangs deliberately causing 'accidents' as a career choice to claim compensation. This gives genuine victims a bad name.

    In addition, another post pointed out that having valid insurance should be displayed in same form as tax disc?

    Furthermore, if you can afford it, spend a tiny bit more to protect NCB?

  • rate this

    Comment number 371.

    I am offended by having to wait 10 mins (600 seconds) to make further comment on other BBC subjects, can someone please send me a claims form!!!

  • rate this

    Comment number 370.

    365.WiseOldBob - I'm with you on that one.

    With the number of overseas call centres we get phoning us up (and bypassing the telephone preference service) I'm all for digging up a few undersea cables as well.

  • rate this

    Comment number 369.

    It is long overdue, these unscrupulous Insurance Companies and so-called Solicitors incite people to make claims when in reality most honest people would not. That is the reason our premiums are so high, its absolutely nothing to do with any increase in collisions or injury. Its all about dishonest law firms and others creating a litigious society so they can make money out of it. Well done PM.

  • rate this

    Comment number 368.

    As a Health & Safety Professional; lawyers are the bane of my life.

    No other 'profession' is allowed to inflate their costs like this bunch of freeloaders.

    It is the threat of legal action, just the threat, that makes most insurers take the easy option & buy off the claim, usually at a ludicrous amount for a minor incident.

    Anything that stops the lawyers gets my vote.

  • rate this

    Comment number 367.

    352.JonDM - I'm paying just a little more - but friends think I'm stupid as they have negotiated crazy deals (in one case < £300). I would not feel so confident that I have a 'robust' policy and won't be hit in the pocket somewhere down the line.

  • rate this

    Comment number 366.

    I do not drive.Never have.I STILL get many "you could get..." texts from these companies, on an unlisted phone number. Although it is easy to assume your details were sold by a garage cos you may have had a car repaired without a claim quite recently, the word "autodialler" springs to mind? These are illegal, so if they do not enforce this law, why should we believe the new one will be better?

  • rate this

    Comment number 365.

    While we're at it, who else thinks that the individual who invented the opposite of an answerphone, ie: the thing that calls you up with an automated message, should be indicted by the International Criminal Court for crimes against humanity (along with the guy who invented portable amplifiers for buskers)?

  • rate this

    Comment number 364.

    360.WiseOldBob ..."regrettably not into the waiting arms of Fenella Fielding."

    Oooooh MATRON!!!

  • rate this

    Comment number 363.

    Time for the insurance companies to sort themselves out - and this is just a small step in the right direction. They can also start by stopping chasing new business and start treating existing customers with some respect and not a cash cow to be fleeced at the first renewal opportunity. Also, they can treat protected no claims as just that - rather than increasing the premiums after an accident.

  • rate this

    Comment number 362.

    The insurance companies operate on a knock for knock basis because firstly they can't be bothered to establish blame and secondly by blaming both motorists equally they can ensure that both parties pay more at renewal time, this should be banned too. I had to fight to get my NCD back when someone hit my legally parked stationary car after I had got out. Got a result after 2 years of aggro.

  • rate this

    Comment number 361.

    354.Chemical-Mix "Adding them up, it comes close to £13000 that i could be owed, for an accident i have NEVER had. It needs to stop now."

    Money for nothing - soooo irresistable - hence the high number of personal injury claims. It is not hard to see how some villains have managed to turn fraudulent claims into a money making business.

  • rate this

    Comment number 360.


    "4 yrs ago my partner's car was hit by another. . . "

    Car, or parner?
    Whenever hard sell cold callers 'phone up at the house I respond with, in the tone of Bernard Bresslaw as "Socket" in "Carry On Screaming": "you'll have to speak to the Master", then just leave the reciever off the hook and walk away with heavy tread, regrettably not into the waiting arms of Fenella Fielding.

  • rate this

    Comment number 359.

    It is highly unlikely that any such changes will be comprehensive enough to avoid loopholes.

    Our society & legislation is just so over complicated due to continual attack and undermining by so called "professionals" who spend so much time/money/effort in searching for profitable needles in haystacks.

  • rate this

    Comment number 358.

    A recurring theme on these boards over the last few days is that we have a greedy few who are costing the rest of us a lot of money.

    Inflation is not 4% ish - look at the price of petrol, gas, weekly shopping etc. Wages are not going up, yet the government think we can still afford to pay up whenever the insurance firms/banks/gas company etc want to bleed us a little bit more.

  • rate this

    Comment number 357.


    Not always the case, chap... I negotiated the purchase of a home gym (after being shown a list of exercises by a physio) to mend me without the cost of a regualr physio, neither the time constraints. The "other" side were happy to pay for it as it got me back to my well paid job MUCH faster :) Not EVERYONE that is injured is a scammer!

  • rate this

    Comment number 356.


    Iphone/Android App called "Rejectacall" perhaps ? :)

    I cant believe its legal to send the bombardment of texts i get on my phone from these people... it isn't when its email, so why is it allowed on phones?


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