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 435.

    16 Minutes ago

    "Yet another symptom of the greed inherant in Capitalism, just like the banks".

    I bet all the socialists refuse to even consider making a claim

  • rate this

    Comment number 434.

    Insurance companies should just be forced to provide a break down of their calculations.

    I recently found my insurance premium went down when I chose to park my car on my drive not my garage, and chose to park in a public car park rather than a secure one. Clearly neither of these make sense- the insurance companies just charge more for what they think people will pick, not for what is more safe.

  • rate this

    Comment number 433.

    Comment number 416 is an Editors' Pick

    Its nice to see a lawyer making the comment you have. Perhaps its worth also considering those who bring actions on behalf of prisoners denied porn in jail, those traumatised by being called "darlin" and murderers and rapist who may face punishment if they are returned to their own countries. The Law Society still upholding standards is it?

  • rate this

    Comment number 432.

    #299 Kennybaby

    You are precisely the sort of person who has caused all our insurances to rise to ridiculous levels. You didn't need to go to hospital and you lost your bike. By your own admission it was worth £400, so you received £4000!!!! compensation by a shyster lawyer, now everyone else is paying for that. I hope you are proud of yourself.

  • rate this

    Comment number 431.

    I have worked in the industry now for thirteen years and have to say that insurers fail to mention other factors when saying premiums only go up because of Personal Injury claims. I see on a daily basis cleints kept in hire vehicle for months on end because insurers are so slow at dealing with the claims or of they do deal with them they do not know what they are doing. They also sell PI's claims

  • rate this

    Comment number 430.

    Remember, your premium will be cheaper if:
    "You have a ******* approved alarm"
    "You park the vehicle off the main road"
    "You park the vehicle in a well lit area"
    "You drive under so many thousand miles a year"
    "You have years of no claims"
    "You've been on an advanced driving course"

    Rubbish. I'm paying more now than I was when I was 18.
    Car Insurance is a scam, fullstop.

  • rate this

    Comment number 429.

    So Kennybaby #229 no wonder you are happy. Minor injuries and £4,000 + who knows what to the ambulance chasers

  • rate this

    Comment number 428.

    Isnt it absolutely amazing, but not surprising, that the insurance companies having got away with robbing customers by finding every loophole possible, find a champion in the government. These claims advisors/referers have plugged a loophole and re-dressed the balance to enable claimants to actually get what they pay for, agreed some (a small minority ) have abused the system, but not many.

  • rate this

    Comment number 427.

    Re: 421 - I think those cameras MAKE you abide the law, regardless of your disposition. It does in Hong Kong - I don't see why you need a law or pre-requisite to make it happen. Also, why isn't a point made about the number of staged/fake dubious claims that means personal injury claims are abused to make money? And that people are claiming for everything wrong instead of getting a repair?

  • rate this

    Comment number 426.

    Vote Winner! Look at the number of comments already. I'm an insurance fraud Solicitor investigating claims where the insurers have 'concerns'. I could end up out of a job if fraud reduces, but I would take it on the chin because change is needed. Next stop - ban no win, no fee agreements! If you have any other kind of dispute you have to pay for representation (unless you are a libelled celeb!)

  • rate this

    Comment number 425.

    What happens if we do exactly what the parasites want? What happens if everybody who owns a car/bike/is a passenger makes a spurious claim? Also what happens if nobody can afford insurance?

    I think big business is coming close to killing the goose that lays the golden egg.

    I love America, but we have been importing some potty ways of doing business from them

    Greed is good - discuss

  • rate this

    Comment number 424.

    Yet another symptom of the greed inherant in Capitalism, just like the banks.

    This American trait of litigation, is yet another US export that will bring the economies of the world to its knees. Does anyone ever stop to look at the big picture?

    You get nothing for free in life and pushing up your own as well as everyone elses insurance policies so you can get a free holiday is despicable.

  • rate this

    Comment number 423.

    "We are very pleased that the government has listened to the insurance industry's campaign for a ban on referral fees."

    I love the way the Insurance Industry make extra money from passing on customer details and then stand back and claim that it's them that have been pushing for this motion change.

  • rate this

    Comment number 422.


    DomKel, do you think that the removal of these fees will actually reduce the number of (frivolous) claims made under the no-win-no-fee scenario, or is it too late already? An informed opinion here would be invalueable :)

  • rate this

    Comment number 421.

    390.Fortitude unknown

    These camera systems look GREAT! So long, of course, as you are a law abiding driver. It wouldn't surprise me if they end up being a pre-requisite for an insurance quote, much as trackers are now for some of the more valueable vehicles available. Soon after that they will become a legal requirement... Big Brother strikes again! :D

  • rate this

    Comment number 420.

    So, if you run a business and it doesn't make as much profit as you projected, you simply add 30% to next years prices.
    [sarcasm]Yes, but there can't be many companies that can get away with a price hike in this current climate.[/sarcasm]
    Can there?

  • rate this

    Comment number 419.

    I wouldn't worry too much about this happening, much like the rest of what "they say" will happen probably never will.

  • rate this

    Comment number 418.

    When we hear about broken Britain its usually connected to an underclass of people who lack moral fibre ,self respect and decency. All I can say is a lot of that underclass seem to be rather well dressed and in good jobs.

  • rate this

    Comment number 417.

    13 Minutes ago

    Your Logic is, of course, flawless.

    I think the hope is that if the information is not imparted to these companies, that only people genuinely wishing to make a claim at the point of the accident will do so, rather than many that wouldnt have being provoked by salesmen, thus reducing claims. I am sure this info will STILL find its way to "them" "somehow" though!

  • rate this

    Comment number 416.

    I have been a personal injury lawyer for 18 years and never before has the profession's reputattion with the public been so tainted as it currently is Claim management companies sale data of accident victims and also get a kick back on the medical report and another kick back from the legal expenses company They make millions from your suffering. I am v pleased that referral fees are to be banned


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