After The Event Insurance blog

So the Government wants to ban referral fees. We have all heard about this and Jack Straw’s campaign (don’t worry, I shall get to him later), but how exactly are they going to do this – and when?

Well the answer is, I am not sure that they can. You see, the Government has a large number of hurdles to jump and proberbial holes to plug before they can get anywhere near to legislation to ban them:

1. First there is Europe. Referral fees are permitted in Europe so banning them here is going to be difficult – there may be anti-competitive claims arising.
2. The Legal Services Board carried out a study of them and concluded that a ban wouldn’t work so it was better to legislate and control them. There was a call for greater transparency rather than sweeping them under the carpet. Better to have the referrers inside the tent er, you know - urinating out rather than outside the tent …. (you get my drift).
3. Alternative Business Structures are soon to be permitted – which means a large claims management company and a solicitor could join forces. Business as usual.
4. Referrers could be taken on as employees of solicitor firms on a low basic wage with a bonus for the number of leads generated. Would this be allowed?
5. Solicitors are allowed to sell cases to other solicitors (and always have been allowed to do this). Would this practice be banned? What about file transfers with WIP being paid? Is that ok?
6. The proposal is to ban referrals for personal injury claims only – not conveyancing or any other legal matter. Surely this is inconsistent and would be challenged.
7. A lot of solicitors receive work for ‘free’ in return for doing other things. For example, some firms get PI claims from insurers but then have to handle their uninsured loss recovery work for nothing. This is a referral fee isn’t it? Is this going to be outlawed?
8. What about a free referral but on condition you give a medical agency 10 medical instructions? Is that a referral fee? Is the Government going to ban freedom of choice and legitimate business arrangements?
9. Here’s another one: 10 firms get together and form a company which advertises for PI claims. It is run by 5 non-lawyers. They all fund this marketing company based on the number of leads they take on. Is this arrangement a referral fee? Is the Government going to ban this? What if the company isn’t a company but a partnership – or a non-profit making organisation. Does the membership of that organisation or slots bought make the arrangement against the rules?

You see, I have only been writing this for about 10 minutes and already I have thought of several serious problems. Give me a few days (and the PI industry a month or two) and there will 100 different options on the list. The problem the Government has is that no one can say for sure what a referral fee is – and if you can’t properly and fully define it then you can’t ban it.

And so to Jack Straw. Has he really though this through? He is up in arms about referrals and claims management companies. He is incensed that insurers have sold injured people’s data to a claims company. The thing is, this goes on in all industries. Loads of companies sell personal details to other companies - which is why you no doubt have had several calls about double glazing, kitchens etc. Are they allowed to do this? Well yes because we have consented to it. Somewhere we have bought something where there is a clause saying the seller can share the data. Can this be banned? I suppose so but it has to be industry wide – it isn’t just Personal Injury’s dirty little secret – it is the western worlds.

Mr Straw is also saying the practice of selling PI claims should be criminalised. Well why didn’t he criminalise it or ban it when he was the Minister of Justice? Well the answer is, he looked at banning referrers but then decided against it.  Instead, he oversaw the cleaning up of the claims management companies by requiring their registration. Why the change of heart? I have no idea.

And you see, he might just be shooting the Labour Party in the foot. Would you believe that in 2009, over 60% of Labour Party funding came from Trade Unions? Where do the Unions get their money from – well membership fees but a large part of their income comes from notional After the Event Insurance policies (soon to be banned under Jackson) and referral fees. Supporting a ban of both is going to cut the amount of money Trade Unions have available and so cut the Labour Party’s funding. It is also going to annoy the Trade Union leaders somewhat.

Maybe, the Labour party has decided they don’t need the unions any more. Mr Straw is playing a dangerous game me thinks.

Box Legal Limited: After the Event Insurance Providers
www.boxlegal.co.uk  | daniel@boxlegal.co.uk | 0870 766 9997

Oh my days. What a week.

To say we have been busy is an understatement. Just a few days into our new financial year and we are 25% up on new policies written compared with September last year.

And that’s not to mention our new website which we have been working on feverishly in the background (thanks Roger!). Or our link to a leading rehab provider  – press release to follow!

So you see, I have an excuse – of sorts. Anyway, let’s have a quick round up of developments outside of Box Legal shall we?

Well, on the Jackson front, Labour MPs seem to be proposing all sorts of amendments to the Legal Aid and Sentencing Bill - with some saying they are attempting to goad the Lib Dems to vote against the Bill’s passage. Anyway, no delays yet but who knows…

Defendant insurers (poor things) are meanwhile blaming claimant solicitors for just about everything. The masters of spin are saying it is the solicitors’ fault that they, the insurers, are having to receive referral fees for cases – running into many millions of pounds. Good eh? If you shout something from the rooftops for long enough, some people might believe you but come on Mr Admiral? Are we really to believe that it is Mr Blogs the high street solicitor who has caused you to turn over £1 billion including tens of millions in referral fees? Mr Blogs has a lot to answer for – it is his fault that car insurance premiums are rising don’t you know.

Well, the Office of Fair Trading may be investigating the rises – we shall see what they come up with but don’t expect the answer to be that it is the insurers fault. Watch out Grandma Smith – it will no doubt be you who will be taking the blame.

What else? Ah yes, premium challenges. Those pesky insurers keep on claiming that clients can’t take out a fixed premium After the Event insurance policy but guess what? Those nice Judges keep telling them they are wrong. It is 3 – 0 to us so far and no sign of any weaknesses. You would think they would give up – would save a fortune in legal fees but then, insurers were never short of a bob or two.

So that’s all folks. Except to say, I hope to become a bit more, er, regular in future.

P.S. My niece (fresh out of university) is looking for some work experience in a law firm (there is only so much insurance a young girl can take). Any one able to help her out?

STOP PRESS: The Ministry of Justice has announced it will be banning referral fees. No timetable has been announced nor any proposals. Watch this space.

Box Legal Limited: After the Event Insurance Providers
www.boxlegal.co.uk  | daniel@boxlegal.co.uk | 0870 766 9997