Law Society and ABI call for end to referral fees

Car insurance companies in the UK have come under renewed fire for the practice of charging referral fees to accident management firms for selling them the personal details of motor car insurance policyholders.

Cheap car insurance providers have been accepting referral fees from legal firms and accident management companies for providing lists of their customers that have filed claims in the wake of car accidents. The practice can be highly profitable, yet more and more umbrella groups for legal services providers and insurers have been clamouring for the it to be banned outright.

Both the Association of British Insurers and the Law Society have come forward to call for the referral fee scheme to be put to an end.  Likewise has the Solicitors Regulation Authority called for legal professionals to make sure that any referral systems in which they participate do not have a compromising effect upon the interests of their clients, and the independent body the Legal Services Board has also made recommendations that the referrals system be reworked to include more transparency at the very least.

However, the only major insurer to pledge to put a stop to the practice has been Axa, which recently announced it will no longer accept referral fees from law firms and related companies.  The Government has been debating stepping in, as it believes that the system as it currently stands has resulted in the creation of a so-called ‘compensation culture’ in the UK in which law firms are encouraging people to bring frivolous claims.  While the Government has pledged reform, there are many opposition MPs who instead call for a complete ban of the system.

Those favouring a ban declare it would force legal professionals to decide on their clients purely based upon the cost and the quality of eac individual claim.  Those opposed to an outright ban are concerned that access to justice will be severely limited for those without the financial wherewithal to afford to pay their lawyers’ legal fees.

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