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11 March 2011

Ban On Referral Fees Keeps Insurance Costs Down Says Law Society of Northern Ireland

The Law Society of Northern Ireland has today welcomed a report by the Transport Select Committee of the House of Commons which has identified that referral fees as a feature of the insurance industry are contributing to high cost of insurance premiums in England & Wales.

 

The Report by the Select Committee supports the Law Society’s ban on referral fees and the Society’s position that referral fees will lead to increased costs.

The Report found that over 40% of personal injury lawyers pay referral fees to receive work from insurers or claims management firms in England & Wales.

These fees which range on average from £200 to £1,000 per referral can impact on the costs of personal injuries claims which in turn result in increased insurance premiums.

Referral fees are one of a number of factors which influence the costs of insurance premiums.

The Law Society is pleased that its position on referral fees has prevented this from becoming a factor in the Northern Ireland market.

The Society’s prohibition applies to solicitors but there are no current prohibitions on other players in the market from paying or receiving referral fees, for instance claims management companies, repair garages or insurance brokers.

However the Society, in conjunction with a significant number of local insurers have developed a unique Claims Advice Service (CAS) scheme which empowers individuals who are the victims of a road traffic accident.

Under the CAS scheme victims of a road traffic accident simply call their solicitor, who can then arrange for the repair of the damaged vehicle and a replacement vehicle.

Commenting on the Select Committee’s Report and the new CAS scheme Rory McShane, Chairman of the Law Society’s Litigation Action Group said:

“This Report highlights that referral fees can increase costs, with the result that we all have to pay more for our car insurance premiums. I am pleased that the Society’s principled position on referral fees has been endorsed today by the Committee. There is still the potential for referral fees to impact on costs in Northern Ireland, where too many middle men get involved once an accident has taken place. Our message to road traffic accident victims is simple cut out the middle men and call your solicitor first.”