For many years it has been a common practice for solicitors to pay a fee for the referral of a personal injury claim to them. The payment of referral fees for personal injury claims was banned as from the 1st April 2013.
The insurance industry maintained a long campaign for the banning of referral fees which has now been successful. It always seemed strange that the motor insurers were keen on the ban on referral fees as they benefitted to the tune of millions of pounds from charging solicitors referral fees for referring their own insured’s claims to solicitors.
Recent events have made it clear how the insurers intend to still benefit from persuading their own customers, and indeed those who their customers run into, to let them refer their personal injury claim to the insurers chosen solicitors.
So what is the loophole that enables insurers to get round the referral fee ban?
Until last year, except under very narrow circumstances, a firm of solicitors had to be owned by solicitors. Following a change in the law it became possible for non- solicitors to own law firms which are called Alternative Business Structures or ABS’s.
Two of the major motor insurers have recently announced that they have bought or bought an interest in firms of solicitors. This means that the insurers can refer claims to their own law firms and do not need to demand a referral fee as they will share in the profits of the ABS to whom they refer the claims.
This means that if you are injured in a motor accident that wasn’t your fault either your own insurers or those for the at fault driver may well try and persuade you to let them refer your claim to their chosen law firm. They will not be doing this because they want you to get the best service or the most for your claim it will be so they can still benefit financially from referring your claim.
This is a perfectly legitimate loophole of which the government are fully aware but have done nothing to prevent when banning the payment of referral fees.
At Wanstalls we welcomed the ban on referral fees believing that it would give greater choice to the public in which solicitors they chose to deal with their personal injury claims. Despite the use of ABS’s and other strategies to get round the ban on referral fees the public still have a completely free choice as to which firm of solicitors they wish to deal with their claim.
We would encourage anyone injured in an accident that wasn’t their fault to exercise their right to choose who deals with their claim. The large firms of the sort that insurers have an interest in will tend to offer a very impersonal service using large numbers of unqualified personnel to deal with claims on a factory basis. Smaller firms like Wanstalls offer a much more personal service where the claim is handled by a qualified solicitor who can be easily contacted at any time you want to discuss your claim.
The choice lies with the client but if you have been injured in an accident that wasn’t your fault and would like the more personal service provided by a smaller firm why not give Wanstalls a call. There is no obligation but if having talked to Wanstalls we think you will decide to exercise your choice in favour of our high standard of service as many people do.
Don’t be bullied by an insurance company into using a particular law firm. Give Wanstalls a call on 0191 375 3938.