How effective is the Personal Injury Referral Fee Ban?
Information in response to Searches related to Personal Injury Referral
The ban related to personal injury referral fees was first introduced by LASPO Act (Legal Aid Sentencing and Punishment of Offenders) of 2012. The actual ban was brought into effect on 1st April, 2013.
Two Fresh Outcomes in SRA Conduct Code
They call for people not being paid a prohibited referral fee and that they also do not pay it. This prohibited referral fee is a payment that is banned under the LASPO Act, Section 56, unless it can be shown that the payment was actually made for other services and not as referral fees. With effect from April 2013, LASPO has made it clear that the payment or receipt of personal injury referral fees is banned in all claims for any damages that follow death or personal injury.
How is the ban applicable?
LASPO Act regulates that a person would be held in breach of it if he or she refers any prescribed legal business to other persons or is referred as prescribed legal business by any other person. He or she is also in breach of this Act if he or she pays or is paid any amount for that referral under Section 56(1). For example, the ban will apply to all personal injury lawyer referrals that occur between regulated people such as between Claims Management Company and solicitors or between solicitors and two separate firms or trade unions or charity organisations.
When a solicitor acts on behalf of a client in connection with prescribed legal business and takes a price per case from some insurance company or from a medical agency for any arrangement post an event for that client or for referring a client for medical reports, it will be considered as a breach of this act in connection with personal injury claims referral fees.
Difficulty in monitoring this compensation culture
Ban on referral fees, that are held responsible for the creation of a compensation culture, will be tough to monitor and will certainly not be effective as a regulatory measure. The government was forced to take an action to prohibit all personal injury solicitors’ referral fee that may be paid by the solicitors to insurance companies and claims management companies or trade unions. It has happened because of grave concerns on the impact of the rising insurance premiums. The Solicitors Regulation Authority in the United Kingdom that covers more than one hundred and twenty thousand solicitors in the country feels that these changes may not have an impact as was originally desired.
To begin with, personal injury claim referral fees were considered legally proper as per the Labour Government, way back in 2004. This led to a big boom in the claims management sector. It was also pointed out some months ago that the cost concerning all personal injury claims had gone up almost to fourteen billion pounds in the last decade. There was a growing concern that these personal injury referral fees were motivating people to put in claims for even minor injuries which they may not have otherwise done so. This had a direct impact on driving the motor insurance premiums up. An average car insurance premium went up as high as one thousand pounds annually.
The personal injury lawyer referral service has made all middle men and lawyers rich with huge profits. It has also left local councils and hospitals with legal bills going up to several million pounds. Last year itself, work related with personal injuries was estimated to be close to two billion pounds for solicitors while NHS paid over a billion pounds in damages.
However, the Solicitors Regulating Authority still feels that it is not going to be easy to establish the personal injury referral fee ban and investigate when referral fees have been paid because firms offer various other services that include advertising, marketing and even claims vetting. It is very much possible that these firms could in all probability be calling referral fees by some other name.