On the 9th September the media confirmed that the government had finally announced that it will ban the referral fees that are paid to insurance companies in return for them passing on the details of the victims of accidents.
This move is welcomed by us at The Injury Lawyers. We have always criticised these payments in the past because they are, in our opinion, bad for the client and the personal injury profession.
Referral fees are paid by some firms of solicitors, mainly to claims management companies and insurance firms, but it can be to anyone who passes on details of an injured person, such as a garage or even the police. Many insurance firms, large and small, have passed on the details of their policyholders after they have contacted them to report an accident that was not their fault. In return for these details, many personal injury solicitors pay a referral fee to the insurance company.
Solicitors who ‘buy’ claims in this way pay for the referral fee out of their own costs that they are awarded if they make a successful claim. These fees are often hundreds of pounds. It is NOT true that solicitors are able to claim back the cost of these referral fees from the other side if they win. Under no win,no fee agreements, solicitors get paid only if they win a case. They will claim their costs from the losing party, usually an insurance company, based on the amount of time that they have had to spend in dealing with the case.
Firms of solicitors that ‘buy’ claims for referral fees must pay the fee out of the money that they are paid for dealing with the claim. This means that those solicitors that do pay referral fees will likely have less money to spend on dealing with their client’s claim. It is inevitable that this will result in a lower quality of service for their clients if this happens, in comparison to a firm that will not use any of their budget in paying a referral fee.
We believe that the payment of referral fees is wrong, and that it results in a poorer service because of unnecessary payments to middlemen who add absolutely no value to the claims process.
We also think that you should choose your own personal injury solicitor based on the quality of the service they can provide and not just to the highest bidder who is prepared to pay the most for your details.
For these reasons The Injury Lawyers have never paid referral fees and never will. Unlike many solicitors, we welcome the ban on referral fees.
