Thursday 26 July 2012
David Healy, personal injury partner at Sampson Coward in Salisbury, welcomes the ban on referral fees which is due to come into force in April 2014.
His view is based on the negative results of the current system. It can appear that claims management companies and insurers ‘sell’ cases to solicitors for varying amounts which result, for example, in solicitors ‘paying’ £800 for a small whiplash type case worth about £1,000 to £2,000 in damages. This could, unfortunately, lead to junior paralegals acting on cases as the profit margin for the firm of solicitors is so small.
It has been suggested that personal injury claims are putting up insurance premiums. However, it is worth noting that when a person is involved in an accident, that person’s insurers pass the claim on to a solicitor and charge a significant referral fee. Thus it is possible for insurers to make income from selling cases.
The positive outcome of banning referral fees is that solicitors should always be in a position to give a higher level of experience and qualification to those in need of good legal representation, and eliminate insurers making money from the system. However, there is doubt as to how, practically, the referral fee ban will be enforced.