Government Gets it Wrong on Referral Fee Ban
The government has recently declared its intention to abolish the payment of referral fees. These are fees paid by solicitors to intermediaries for passing on personal injury claims.
The government says that abolishing these fees will stop insurance premiums, particularly motor insurance premiums, rising. However the government appear to have got themselves into a muddle.
The fact is that a large number of referral fees are actually paid TO insurance companies and so the effect of abolishing them is likely to be to increase insurance premiums.
Insurance companies admit that they generate a large amount of income by “selling” accident claims to solicitors.
Again, mistakenly, the government says that referral fees are driving up legal costs however as the vast majority of personal injury claims are dealt with for fixed legal costs this is simply not the case.
Whilst there may be many good reasons for abolishing or controlling referral fees it is simply not the case that the proposed ban will reduce insurance premiums nor will it reduce legal costs.
