Accident Claims And The Truth About The Real Financial Merry-Go-Round

The historic fight between the insurance industry and lawyers continues to rage on. Insurance companies have been crying wolf over solicitors costs in accident claims, bemoaning that they are getting out of control, with the latest propaganda war that’s flatly blaming accident claims solicitors for the rising cost of car insurance! Are solicitors so powerful that they can bring down the mighty insurance industry or is it a very clever propaganda ruse?
Hypocritically, insurance companies have for years been dubiously and quietly sitting on a financial merry-go-round making huge sums of money by selling cases to solicitors. Hit And Run No Witness And while insurance companies remained the only serious kids on the block in referring accident claims cases to solicitors, life couldn’t have been more cosy.
However, with the Solicitors’ Introduction and Referral Code in 2004, which was replaced by Rule 9 of the Solicitors Code of Conduct 2007, the ban on referral fees was finally lifted.
This dawned a new era in personal injury claims, with the emergence of claims management companies and the sudden flood of high-profile marketing campaigns aimed at wooing victims of accidents into bringing compensation claims.
Now that the insurance companies – who have substantially held a monopoly on referral fees – have a serious competitor who aren’t afraid of spending huge sums of money on national advertising campaigns to bring in a flood of new accident claims, they’re unhappy.
The insurance industry is now finding itself outside of the financial loop as more injury cases get swooped up by Claims Management companies. They have lost their control of the claims market. Worse still, the insurance industry is now starting to wither as it finds itself having to pick up the tab on more accident claims as the general public become more educated on their legal entitlements.
The question one must ask is would the insurance industry have been so vocal about solicitors costs and now referral fees if it had maintained its low-key monopoly on personal injury referrals? Somehow I doubt it very much.
It was always very unsettling to me that insurance companies were being paid by their appointed panel solicitors who then pursued a claim on behalf of the injured party against another insurer. A major problem with this state of affairs is that the insurance industry is a very small market, controlled by a few big players. So it wouldn’t be uncommon for a firm of solicitors to pay a referral fee to an insurance company against whom it may need to sue in order to claim damages for a victim of an accident.
Whilst I have no doubt that the instructing solicitor will always act in the best interest of their client (the injured party), I do question the degree to which they can act as robustly in their representation of that client, when they have a financial umbilical cord with the insurance company.
As a solicitor that has worked in this field without having to rely on referrals from external organisations, I’m quite comfortable about rattling an insurance company’s cage in my pursuant of ensuring that clients that I represent get what they should be entitled to. I’m not so sure that I can act so freely if I had one hand in an insurance company’s pocket.
The market for too long as been a cosy place for the big brand players and I think it’s high time that we have more transparency.
I therefore applaud the recent decision of AXA, as the first insurance company in the UK to refuse “acceptance fees” from personal injury lawyers. It is the right message to give to the market and a step in the right direction. Whether other insurers will follow suit, I’m not sure as there’s too many vested interests.
So while the insurance company’s cosy position is now under threat, we’re in danger of seeing it replaced with yet another threat that may end up undermining quality of service.
In a few short years we have seen a dramatic rise in the number of advertisements by companies seeking to attract accident victims, which by itself is not an issue. However, what is more worrying is the increasing number of shady business practices such as unsolicited and intrusive telephone calls, mail and text messages that gives everyone in the industry not least solicitors a very bad reputation.
Unless there are tighter controls on referral fees including their use as bribes to entice victims of accidents to register with one or other company, and unless there is greater enforcement against How Do Lawyers Get Paid If They Lose A Case unruly business practices, we’re in danger of isolating the legal profession and causing it irreparable damage at a time when we need to be building greater trust with the general public.

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