Personal injury claim referral fees to be banned

Friday, 09 September 2011 10:19

Referral fees for lawyers in personal injury cases are to be banned in a bid to combat rising policy charges and the current "compensation culture", the Ministry of Justice has announced.

Justice Minister Jonathan Djanogly said the 'no-win, no-fee' system means middle-men make a profit and the general population pay the price through higher insurance policy payments.

"Honest motorists are seeing their premiums hiked up as insurance companies cover the increasing costs of more and more compensation claims," he 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."

The proposals - currently before Parliament - focus on stopping losing defendants having to pay a 'success fee' to reimburse the claimant's lawyer for other unconnected cases he may have lost.

Under the new regime, the person making the claim will pay a capped success fee, in the hope that a fairer split of costs between parties and lower legal costs overall will emerge.

The new legislation will also ban claims management companies (who advertise compensation claims for accidents), insurance companies and lawyers charging each other referral fees for passing the claim up the line.

Simon Douglas, director of AA Insurance, welcomed the new rules, suggesting they should put an end to organisations selling on drivers' details without their knowledge and discourage many claims from happening at all.

"We hope that this will bring to an end the practice of no-win no-fee cold calling and the relentless advertising by accident management and personal injury firms to encourage drivers who may or may not have been injured in a collision, to make claims," he added.

Which? executive director Richard Lloyd described the proposals as "great news for motorists", adding: "Referral fees feed the growing compensation culture that has been pushing up insurance premiums at a time when many families are already feeling the pinch. It's absolutely right to ban them, and quickly."

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