Ban on injury claim referral fees announced

9 September 2011

29235 Yesterday, the OFT announced a wide-ranging investigation into the motor insurance game, looking at how premiums can have risen by 40% over a period of a year. Today, one of the cited reasons, ‘compensation culture’ is being tackled by the government, as they announce a ban on referral fees in personal injury claims.

The practice, where solicitors pay insurance companies for the personal details of accident victims is a murky old business and has been going on for twenty years, with more and more people pursuing personal injury claims as a result.

The beautifully-named Justice Minister Jonathan Djanogly said: “Many of the claims are spurious and only happen because the current system allows too many people to profit from minor accidents and incidents. Referral fees are one symptom of the compensation culture problem and too much money sloshing through the system. People are being encouraged to sue, at no risk to themselves.”

Agreement came from the slightly-less-beautifully-named Nick Starling of the Association of British Insurers – he said: '”Everyone has seen their premiums rise. It's certainly a racket. It's a sick culture that we have to turn round. I say culture because it's not just a question of insurance companies, it's small businesses being afraid of litigation, of being put out of business by litigation, it's larger companies who are often self-insured having to put up their prices... and then it goes [wider] to schools not wanting to send children on school trips because they are afraid of litigation.”

The government have also said that they also want to put an end to losing defendants being forced to pay a ‘success fee’ to reimburse the claimant’s lawyer, with new legislation meaning that the person making the claim will have to pay the success fee, which will be capped.

As yet, there has been no timescale announced for bringing in the new rules.

TOPICS:   Insurance

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