MPs seek action over PI lawyers’ fees but question value of referral fee ban

Motor accidents: claims go up while casualties go down

MPs have accused personal injury (PI) solicitors and insurers of losing sight “of the interests of their customers as a whole by encouraging claims to be maximised”. They called for action over the level of fees paid to lawyers while questioning the effectiveness of the referral fee ban.

In a follow-up report on last year’s investigation into the cost of motor insurance, the transport select committee concluded that the growth in PI claims is the main reason for the rise in premiums and called for the evidential burden of whiplash to rise.

Claims rose 17% during 2010/11 to 790,999, even though the number of casualties in road accidents fell 6% to 208,648.

It called for the fees paid to lawyers under the RTA portal to be reviewed, with a report back within six months, to see if they “relate to the cost of the actual work involved”, along with whether the scheme “acts as an incentive for insurers to concede claims”.

The report laid a large amount blame on insurers, calling on the industry to abandon “sharp practices” in the management of car accident claims, such as passing drivers’ personal data to other parties or taking secretive referral fees from solicitors, garages and car hire firms.

They backed justice committee calls for penalties for breaches of the Data Protection Act 1998 to be beefed up, and said the government should initiate an investigation of cold calling intended to generate PI claims, “with a view to examining the legal and regulatory options for curtailing this activity”.

The MPs said: “We are disappointed that the insurers, who have complained about the dysfunctionality of the current system, have not done more to improve it.”

They noted that their earlier call for greater transparency around the referral fees insurers receive from all those involved in claims “was met with silence from the insurers, which perhaps tells its own story”.

The proposed referral fee ban is likely to reach the statute book this spring and the report said: “Implementation will come later, perhaps much later, and will depend on how the regulators approach questions such as definition of ‘referral fee’. In the meantime, the introduction of alternative business structures could transform the market for legal services and render this debate largely redundant.”

In any case, it said the government should focus on stopping insurers from receiving any referral fees, rather than only in relation to legal action, once the ban is in force.

On whiplash, it questioned diagnoses unsupported by further evidence of injury or personal inconvenience as the basis for a claim. “The threshold for receiving compensation in whiplash cases should be raised and, if the number such claims does not fall significantly, the government should bring forward primary legislation to require objective evidence… before compensation is paid.”

Committee chairwoman Louise Ellman said: “Insurers, solicitors and claims management companies have themselves driven up the cost of motor premiums by encouraging people caught up in road accidents they did not cause to claim for personal injury, car hire, and other legal costs.

“Although we strongly support access to justice, drivers should not be railroaded by cold callers into launching legal action.”

Claimant lawyer groups – the Association of Personal Injury Lawyers (APIL), Motor Accident Solicitors Society and Access to Justice Action Group – all welcomed the committee’s focus on insurers’ activities, but warned against raising the bar on whiplash.

An APIL statement said: “Whiplash injuries can be extremely painful and can often linger, leaving some people with chronic conditions. It must be remembered that the burden of proof lies with the victim. The defendant has every right, and opportunity, to challenge medical opinion if it is thought to be wrong.”



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