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OK – so we’ve been covering the fantastic news that referral fees for claims, such as referrals through legal expenses insurance / motor legal protection where your insurers will ‘sell’ your details on to a third party solicitor for cash, which forms part of a government agenda to make the world of compensation claiming more efficient.

One of the other areas has been surrounding the cut of the legal aid bill and potential changes to the no win, no fee system. The gist and result of the whole idea will result in a reduction in the number of payouts, which I imagine is intended for the costs of insurance to lower; although I’d love to see the day the insurers pass on saving to the consumer!

But, back to the main topic, sadly, proposals in place involve shifting some of the costs of the no win, no fee system to the Claimant from the Defendant. We strongly oppose such a notion, as it will result in innocent accident victims having their payouts slashed to cover costs the Defendant, i.e. the person or party at fault for the injuries, will no longer have to pay the full amount.
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At The Injury Lawyers we welcome the recent announcement that referral fees have been banned.  We believe that this will provide greater transparency within the legal and insurance world and will ensure that the Claimant gets the best possible service.

A referral fee is a fee paid by a solicitor or claims management company to an insurer for the details of those who have been unfortunate enough to have been involved in an accident and sustained injuries as a result.  For example, you have been involved in a road traffic accident and suffered a broken arm through no fault of your own. 

Insurers know you have a claim for compensation and will provide your details to a solicitor or claims management company who is willing to pay between £200 and £1,000 on average for those details.  The reason they will pay such a hefty fee is because they know your claim for compensation has excellent prospects of success and that they can get this referral fee back and more in legal costs when they win your case.  All they have to do is get in touch with you, get you on board, and then win your claim – which is actually quite straightforward.
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OK – so over the last few months I have been praising former Justice Secretary Mr Jack Straw for exposing the insurance industries “dirty secret” that they are responsible for the exponential increases in insurance premiums by selling claims on to lawyers for pure profit.

When the insurance companies have been telling you that the increase in premiums as a result of personal injury lawyers and claims has resulted in increases of up to 30%, it transpired that this was largely a symptom of your own insurance company encouraging potentially scrupulous claims by pushing you in to making one so they can cash in on up to £1,000 for referring your claim. Even if you’re genuine, they’ll make you claim using their referral fee solicitor; not because they are doing you a favour, but because they get paid to pass your personal details around.

We have spoken out against this on hundreds of occasions, as we never involve ourselves in referral fees, and have advised many victims of the referral fee system to change lawyers as soon as they can after they have been subject to poor service levels and potentially low payouts because their referral fee solicitor is too cash strapped to act for them in the right way thanks to wasting a huge portion of their budget on paying the fee.
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On the 9^th September it was confirmed by the government that there would be a ban on referral fees for personal injury claims.  A referral fee is a fee paid by a solicitor or claims management company in return for the details of people who have been involved in an accident, and have got good prospects for a successful personal injury claim. 

This fee is often in the region of £200 to £1,000.  Worst of all, the victims who’s details are getting passed to third parties probably do not want their details being distributed if they knew that they were.  A solicitor will often pay this referral fee because they consider that in the long run they will be able to make money from the claim.  For example, a solicitor may pay £400 for your details – they get you to pursue your claim with them and win it, and they get paid a few thousand pounds by the Defendant’s in respect of their costs.  In other words, they make a tidy profit.

At The Injury Lawyers we have always spoken out about referral fees and have never paid a referral fee to any company.  As such, we welcome this ban on referral fees.  This is because we do not consider that they are a good thing for the client.  For example, if we were to spend £400 on your buying your claim through a referral fee, that is £400 less we now have to spend on progressing your claim as efficiently as possible.
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On the 9^th 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.
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The referral fees involved in personal injury claims is a topic we have blogged about and condemned on so many occasions. We, as in independent firm of specialist personal injury lawyers who hate the concept of referral fees where middlemen profit from injury victims in return for passing details around, are proud to have never been a part of it.

Just in the last few months we were ecstatic to hear that our former Justice Secretary Mr Jack Straw had exposed what has been called the insurance industries “dirty little secret” when he investigated how the details of one of his constituents was passed around for profit following a road accident. We were overjoyed to hear the investigations concluded that the real reason for insurance premiums being driven up was a symptom of the referral fees rackets.

Now, it appears we are finally making some headway in ridding the country of the referral fee disease.
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At The Injury Lawyers we have never paid a referral fee for any of our client’s claims.  In fact, there are no circumstances under which we would pay a referral fee for a claim.  It is simply not how we operate.

A referral fee is a fee paid to a third party in return for an accident victims details where this person has been involved in an accident and likely has a potential claim for compensation.  Usually a solicitor will pay an insurer or claims management company and they will give them contact details so that they can hopefully get the victim on board to make a claim, and in the long run make money from doing so.

Typically a referral fee will cost anywhere in the region of £200 to £1,000.  By paying a referral fee a solicitor has demonstrated that they are wanting to act on your behalf to make money.  For example, your case could be worth £10,000 to £20,000 to your solicitor who has paid £1,000.  As you can see, a good profit can be made and it is in their interests to get hold of your claim at this price so that they can benefit in the future.
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